WHAT IS THE APPRENTICESHIP LEVY?
The apprenticeship levy is a payroll tax on UK employers to fund new apprenticeships, due to come into play 1st May 2017.
The government says that any UK employer, in any sector, with a salary bill of more than £3 million per tax year will pay the levy.
The levy is set at 0.5% of your salary bill and will be a monthly deduction, so in reality, these costs will be taken in any month where your salary bill is over £250,000.
Earnings in scope for the levy include any remuneration or profit coming from employment of all staff (including directors), such as wages, bonuses, commissions, and pension contributions.
Please use our Levy Calculator
What is an Apprenticeship
There are rules governing what an apprenticeship is.
The main ones are:
- The apprentice must be employed in a real job; they may be an existing employee or a new hire
- The apprentice must work towards achieving an approved apprenticeship standard or apprenticeship framework
- The apprenticeship training must last at least 12 months
- The apprentice must spend at least 20% of their time on off-the-job training
How is the Levy Calculated?
Employer of 250 employees, with an average gross salary of £20,000
Salary bill: 250 x £20,000
Levy entry point: = £3,000,000
Therefore Levy payable on £2,000,000
Levy sum: 0.5% x £2,000,000 = £10,000
= £10,000 annual levy payment
Employers who pay the levy and are committed to apprenticeship training will get more out than they pay in to the levy and will be entitled to a 10% top-up to monthly funds from April 2017.
Employer has £10,000 annually entering their levy account
Monthly account funding = £1,000
Top up: 10% x £1,000 = £100
Levy monthly account increase:
£1,000 + £100 = £1,100
How can you use your Levy Funds?
Funds can only be used for:
- Apprenticeship training and assessment with an approved training and assessment provider.
- Apprenticeship standards are not just for entry level positions within your business. Your levy payments can be used to fund education and training for your existing workforce at all levels within your organisation. Staff looking to progress into more senior positions could be eligible for an advanced, higher, degree or Masters-degree equivalent apprenticeship.
Funds cannot be used for:
- Statutory licenses to practice
- Travel and subsidiary costs
- Managerial costs
- Work placement programmes
- The costs of setting up an apprenticeship programme
Levy: How is paid?
- Your payroll department will calculate, report and pay your levy to HMRC, through the Pay as You Earn (PAYE) process alongside Income Tax and National Insurance from April 2017
- Single employers with multiple PAYE schemes will be added together in levy calculations
- Connected employers – the government intends to allow employers to share one allowance between employers who are in connected ownership or control (for example groups of companies or joint ventures)
- Your levy payments will be recorded on the Digital Apprenticeship Service website where you can access your account at any time. NGTC will be happy to help you set this up
Levy: Creating your Account?
Online tools for employers will be available via the Digital Apprenticeship Service over the next year. You will be able to register to create your account from January 2017 and you’ll be able to familiarise yourself with the service.
Levy-paying employers will be able to use the service to pay for the training and assessment of apprentices from April 2017. When you’ve registered, you’ll need to verify your Pay as You Earn (PAYE) schemes and link them to your account. You will be able to use more than one account if you’d like to keep your schemes separate.
Levy: When will funds appear in your digital account?
You will be able to see funds appear in your digital account monthly, a few working days after you have confirmed your pay bill and levy contribution to HRMC for the previous month.
This means that the first time you will see any funds in your digital account will be late May 2017.
Levy funds expire 24 months after they enter your account unless you spend them on apprenticeship training. Levy spend will be applied on a first in, first out basis and applies to any top-ups in your digital account.