Following an initial announcement in the 2015 summer budget, a new apprenticeship levy comes into force with effect from 6th April 2017. The levy is payable at a rate of 0.5% of an employer’s total wage bill and applies to all employers in the UK, across all industries and sectors, and is payable regardless of whether the business currently has, or intends to have, any apprentices.
Employers will have a levy allowance of £15,000 per year to off-set against the levy payable. This means that employers will only have to pay the levy if their wage bill exceeds £3m in any given year.
Employers will calculate, report and pay the levy to HMRC through the pay as you earn process, alongside tax and national insurance contributions.
The benefits to employers are that:
- for those employers paying the levy, their payments are credited to a digital account and can be used to pay for training apprentices (although the funds will expire if not used within 2 years). The Government will provide a 10% top-up on the credited amount.
- for those employers who do not pay the levy, or have used up their credits, they will only need to contribute 10% towards the training and assessment costs, with the remaining 90% being funded by the Government, subject to the maximum amount of Government funding available for that apprenticeship.
The funds can be used to pay for apprenticeship training and assessment with an approved provider and assessment organisation. The funds cannot pay for wages, the costs of setting up an apprenticeship programme or travel.
Fabio Grech LLB (Hons) – Partner
Sarah Alford – Associate
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