Apprenticeship Levy


This week is National Apprenticeship Week 2018. Apprentices throughout the UK will be sharing their experience and commitment to Apprenticeship qualifications supported by their employers.

Employers that recruit Apprentices should be aware of the Apprenticeship Levy which was announced in the 2015 Autumn Statement with plans to come into effect from April 2017. The information below provides detail of an employers responsibility to the Levy.

The Apprenticeship Levy is a new measure and there is no existing legislation.

Who is likely to be affected

This will affect employers in all sectors. The levy will only be paid on annual paybills in excess of £3 million, and so less than 2% of UK employers will pay it.

The Apprenticeship Levy will be a levy on UK employers to fund new apprenticeships. In England, control of apprenticeship funding will be put in the hands of employers through the Digital Apprenticeship Service. The levy will be charged at a rate of 0.5% of an employer’s paybill. Each employer will receive an allowance of £15,000 to offset against their levy payment. It will be introduced in April 2017.

Policy objective

The government is committed to boosting productivity by investing in human capital. As part of this, the government is committed to developing vocational skills, and to increasing the quantity and quality of apprenticeships. It has committed to an additional 3 million apprenticeship starts in England by 2020. The levy will help to deliver new apprenticeships and it will support quality training by putting employers at the centre of the system. Employers who are committed to training will be able to get back more than they put in by training sufficient numbers of apprentices.

Operative date

The levy will have effect on and after 6 April 2017.

Legislation will be introduced in Finance Bill 2016 and will provide for a levy to be charged on employers’ paybills at a rate of 0.5%. The levy will be payable through Pay As You Earn (PAYE) and will be payable alongside income tax and National Insurance. To keep the process as simple as possible “paybill” will be based on total employee earnings subject to Class 1 secondary NICs.

Each employer will receive one annual allowance of £15,000 to offset against their levy payment. There will be a connected person’s rule, similar the Employment Allowance connected person’s rule, so employers who operate multiple payrolls will only be able to claim one allowance.

Economic impact

It is expected that the levy will support productivity growth through the increase in training. It may have a near-term impact in reducing earnings growth, although by supporting increased productivity, it is expected that the levy will lead to increased profitability for businesses, and increased wages over the long-term.

Impact on individuals, households and families

The measure is not expected to impact on family formation, stability or breakdown. There are no direct impacts on individuals and households However, it is expected that the Apprenticeship Levy will create more apprenticeship vacancies in the near term.

Equality impacts

It is not anticipated that there will be any direct equalities impacts on the groups sharing protected characteristics.

Impact on business including civil society organisations

The levy will help to support quality training, and employers who are committed to training will be able to get more out than they pay in levy. The government wants this measure to be administratively simple, and therefore employers will pay and report Levy payments through their normal payroll processes, using PAYE real time information (RTI).

The Apprenticeship Levy will also operate on the basis of known definitions which employers will already use in relation to National Insurance contributions. The levy will be paid by less than 2% of UK employers, i.e. those who have annual paybills of more than £3 million. For employers paying the levy, the measure is expected to have some impact on administration costs and the impact will vary by employer, depending on the size of their paybill.

The policy intention is that they will calculate and pay the levy on a monthly basis. HM Revenue and Customs (HMRC) will engage with employers to discuss and assess the impacts on them.

Operational impact (£m) (HMRC or other)

The operational impact on HMRC will not be significant. The levy will be collected through PAYE RTI employer submissions. There will be also be a need to change HMRC’s accounting systems. HMRC’s costs for setting up the levy are estimated at £7 million.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be monitored through information collected through employer’s tax returns.

If you would like to know more about National Apprenticeship Week visit http://bit.ly/2BXJMmF

This information has been supplied by gov.uk

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