The levy

The apprenticeship landscape is currently going through a period of rapid change
but what’s actually happening?

The government has committed to achieving three million apprenticeship starts by summer 2020. To help achieve this, the apprenticeship levy is being introduced from April 2017

Levy payments will be ring
fenced and held in a

DIGITAL
ACCOUNT

for organistations to reclaim and
used to purchase apprenticeship
training from approved providers

Individual employers or
employer groups can create

STANDARDS

The levy will be
introduced from

APRIL 2017

Government target of

3 MILLION

Starts in 2020

No employer NI contributions for employers aged

UNDER 25

on an approved apprenticeship scheme

Organisations will be able to get out more than they put in via a top up system, where they will increase the pot by

10%

The Levy Rate has been set at 0.5% of
employers UK payroll total and will be collected via

PAYE

The levy allowance will
operate on a

MONTHLY basis

An employer will have a set period in which
to reclaim levy funds of

24 MONTHS

Our apprenticeship handbook

The apprenticeship levy – how it will affect you

Ten tips for a successful levy strategy

What are apprenticeships?

What value will they bring to your business?

Apprenticeship frameworks and standards

Linking apprenticeships to the workplace

How Capita can help…

FAQs

What is the Apprenticeship Levy?

The November Spending Review revealed that there was a levy on apprenticeships. This levy is an extra payroll tax set at 0.5% on the employer’s bill and will be collected through PAYE.

Who is affected by the Apprenticeship Levy?

All businesses in the United Kingdom with a pay bill of £3 million will be affected by this levy. Companies grouped together under common ownership are seen as one business.

In what year will the Apprenticeship Levy be introduced?

The levy will come into force in April 2017.

What counts as a pay bill?

The pay bill is based on the sum amount of earnings though this is subject to National Insurance Contributions. All persons on the payroll that are paid through PAYE will be included in the bill. Income includes all or any profit or remuneration from work such as bonuses, pay, commission and pension contributions where National Insurance is paid.

How does the Apprenticeship Levy work?

With the levy at 0.5% of the gross annual pay bill, employers have an allowance of £15,000.

The annual fee for an employer with a wage bill of £10 million will look like this:

£10 million x 0.5% – £15,000 – £35,000

The levy allowance is conducted on a monthly basis and will accrue over the year. Employers have an allowance of £1,250 every month; if the allowance for the month is not used, it will be carried over to the next month.

The HMRC collects the total levy amount on a monthly basis. The funding for training apprentices can be accessed by employers via a digital account. Should an employer not spend the allocated levy amount on apprenticeships, the money will then be assigned to other employers within the scheme.

If your company is part of a group, then you must choose how the levy allowance is going to be allocated to the individual companies. All decisions must be made at the start of the tax year and will be set for the whole year. Every employer within the group must calculate their payments using the methods listed above while utilising their portion of the £15,000 levy allowance.

Payments to the HMRC under the apprenticeship levy are viewed as an acceptable deduction for Corporation Tax.

Does the government supply additional funding to those paying the Levy?

A 10% top-up will be applied by the government to your levy account for use on apprenticeship training within England. The top-up is applied on a monthly basis, at the same time funds enter your digital account. For every £1 in your account, your company will receive £1.10 from the government. All funds including top-ups have an expiry date of 24 months unless they have been allocated to apprenticeship training.

What can the Levy be used for?

All funds in the digital account must only be used for the training of apprentices with an approved training provider. The funds cannot be used to pay for additional costs with apprentices or other training requirements for example: travel costs, managerial costs, apprenticeship training set-up cost, statutory licences and more. There are plans within the government so that from 2018 onwards, employers have the ability to transfers funds allocated to other employers.

What if there are not enough funds for training?

In the event that the funds allocated are not enough for the training costs of apprentices, the government will pay up to 90% of the added costs.

How does the government calculate training and assessment costs?

Each apprenticeship standard and framework is allotted in a funding band that sets the maximum amount that can be used to pay for training costs over the duration of an apprenticeship. All employers paying for apprenticeships are subject to the same funding bands.

How does the Levy affect previously hired apprentices?

All apprentices that have been accepted onto a programme before May 2017 will receive funding for the whole duration of their apprenticeship. This will be under the terms and conditions that were in force at the start of the apprenticeship.

Is there a system for employers who don’t pay the Levy?

There is no need to use the digital apprenticeship service for payments towards apprenticeship training and assessment if you do not pay the levy. This changes in 2018 due to the new funding system beginning in May 2017. Employers can select the training their apprentices receive and the body in charge of this. A contribution of 90% will be made by the government towards this cost.