With a lot of information floating around about the Apprenticeship Levy, it’s hard to interpret all the information and get a clear understanding. Therefore, we’ve put together a fact sheet to provide this information in a clear and concise manner. However, if there’s something you want to know that we haven’t covered, please contact us on: 01305 831706 or firstname.lastname@example.org
What date will the Levy come into effect?
6th April 2017
What is the aim of the Apprenticeship Levy?
To support employers in growing the number and quality of apprentices in their workplace. It aims to fund three million new apprenticeships in England by 2020.
Who will it apply to?
- UK employers in the public and private sector with a payroll of over £3 million a year.
- UK employers connected to other companies or charities for employment allowance, which in total have an annual payroll of over £3 million a year.
Note: It is important to remember that payroll includes payment for wages, bonuses and commissions that are subject to employer Class 1 secondary National Insurance contributions.
How will it work?
The levy will be charged at a rate of 0.5% of the annual payroll, but, employers will have a levy allowance of £15,000 per year to offset against the levy payment.
Employers that are connected to other companies or charities, will have the £15,000 allowance to share between the group.
Any apprenticeships started from 1st May 2017 will be funded according to the new rules. However, apprentices that were accepted on to an apprenticeship programme before 1st May 2017 will be funded for a full duration of the apprenticeship under the terms and conditions that were in place at the time the apprenticeship started.
The Apprenticeship service will distribute the funds raised by the levy for employers to use on apprenticeship training in England through new online digital accounts – known as Apprenticeship Service Accounts.
What do I need to do by the 6th April 2017?
You will need to tell HMRC how much Apprenticeship Levy you owe each month. However, this will only apply if:
- you think your annual pay bill for the tax year will be more than £3 million – including connected companies and charities
- if in the previous tax year your annual pay bill was £3 million or more – including connected companies and charities
How do you calculate what you owe?
The Apprenticeship Levy is charged at 0.5% of your annual pay bill.
There is a handy tool to help you calculate this here: https://estimate-my-apprenticeship-funding.sfa.bis.gov.uk/
However, if you want to understand the method used to calculate the levy step by step:
- Calculate your total pay bill for the year to date.
- Add up your monthly levy allowances for the year to date
- Subtract your levy allowance for the year to date from 0.5% of your total pay bill for the year to date.
- Subtract the amount of the levy you’ve paid in the year to date.
For example, when put into practice, it looks like this:
- An annual wage bill of £3,500,000.00.
- 0.5% of this is £17,500
- Then work out the difference between £17,500 and £15,000. This is £2,500
- Divide £2,500 by 12, to get the monthly levy allowance. This is £208.33333.
- However, this must be rounded down to the nearest £ making this, £208.00
- The Government will then apply a 10% top up this if all the employees LIVE in England.
- Therefore, if this is the case the monthly Apprenticeship Levy will be £229 (£208 + 10% = £229)
How do I report my Apprenticeship Levy each month?
Using your Employment Payment Summary, you will need to include the following when reporting to HMRC:
- the amount of the annual Apprenticeship Levy allowance you’ve allocated to that PAYE scheme
- the amount of Apprenticeship Levy you owe to date in the current tax year.
What is the Digital Apprenticeship Service Account?
This is a digital account storing the amount that you have to spend on apprenticeship training in England.
You will be able to select an apprenticeship framework and choose the training provider(s) that you want to deliver the training, along with the organisation that will assess your apprentices through this Service Account.
The account can also be used as a job board to post apprenticeship vacancies.
When will the Digital Apprenticeship Service Account be ready to use?
You can register for this now.
How do you register for the Digital Apprenticeship Service Account?
To do this you will need:
- Your Government Gateway login details for any PAYE schemes you want to include in your account.
- Your Company’s incorporation or registered charity number.
What will the Government give me?
The Government will add a 10% top up each time funds are added into this account. For example, for every £10.00 that you add to your account, you’ll get another £1 added by the Government topping it up to a total of £11.00.
However, this 10% top up will only be applied if all the employees (100% of them) live in England.
Do the funds ever expire?
Yes - Funds in the account will expire 24 months after they enter. However, the service automatically uses the funds that entered your account first.
How will my Apprenticeship Levy be paid?
Your Apprenticeship Levy will be collected through PAYE on a monthly basis alongside income tax and National Insurance contributions to pay the relevant training provider.
How will I choose and purchase apprenticeship training?
You will be able to choose your apprenticeship training through the Digital Apprenticeship Service Account.
There are 2 different types of apprenticeship training to choose from:
- Apprenticeship standards – each standard covers a specific job role and sets out the core skills, knowledge and behaviours of an apprentice required to be fully competent in that job role and meet the needs of employers.
- Apprenticeship frameworks – a series of work-related vocational and professional qualifications with workplace and classroom based training.
The funds to pay for this apprenticeship training will be taken each month to pay the training provider.
What if there are not enough funds in your Digital Apprenticeship Service Account?
You will be asked to make a contribution to the extra cost of training and to pay this directly to the provider, rather than through your account. You will be able to spread the contribution over the lifetime of the apprenticeship and agree a payment schedule with the provider.
A co-investment arrangement will take place between the Company and the Government to help to support you meet these additional costs. This will be at the Government paying 90% towards the extra cost and the employer paying the remaining 10%.
What can’t the Apprenticeship funding be spent on?
- The costs associated with your apprentices or wider training effort. Such as wages, statutory licences to practice, travel and subsidiary costs, managerial costs, traineeships, work placement programmes or costs of setting up an apprenticeship programme.
- Un-approved training providers – funds can only be spent in your apprenticeship service account or access Government support for apprenticeship training delivered by an approved training provider.
What if your annual pay bill is under £3 million a year?
You will not need to use the Digital Apprenticeship Service Account to pay for apprenticeship training until at least 2018.
By 2020, all employers will be able to use the Digital Apprenticeship Service Account to pay for training and assessment for apprenticeships.
However, you will be able to choose the training you’d like your apprentice to receive using the registers available on the Digital Apprenticeship Service Account.
You will be required to make a 10% contribution to the cost of this training and the Government will pay the 90% (co-investment arrangement). You must make this payment directly to the provider and you will be able to spread it over the lifetime of the apprenticeship.
What if your annual pay bill increases to over £3 million a year?
You will need to report this to HMRC when this happens, informing them how much Apprenticeship Levy you owe each month.
How long do I need to keep the records for?
For 3 years from the tax year they relate to.
What are the penalties for non-payment?
The same time limits, penalties and appeal procedures as for income tax.
Are there limits on the amount that can be spent on each Apprenticeship?
Yes – you will not be able to spend an unlimited amount on a single apprentice. A cap will be applied, that will vary according to the level and type of apprenticeship.
Are there rules to Apprenticeships?
Yes – the main ones are:
- the apprentice must be employed in a real job; they may be an existing employee or newly hired
- 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.
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