Member Blog: Apprenticeship Levy – what you need to know

Member Blog: Apprenticeship Levy – what you need to know

by Daniela Cohen, Senior Associate Employment & Business Immigration Group, Sheridans

The Apprenticeship Levy has almost snuck into effect without being noticed. There has been little press attention on the matter, however the new regime will have a significant impact on all employers who are caught by the new regulations. Since 6 April this year, all employers with a total payroll that exceeds £3 million will be subject to the new levy, which is essentially an additional tax for employers who meet the payroll threshold. 

The intention is that companies can then access the money that they pay as a levy to take on apprentices.

 We have summarised below the key implications of the new Apprenticeship Levy for your business:

  • Employers whose total payroll (on which NICs are payable) exceeds £3 million will be caught;
  • The levy will be at a rate of 0.5% of the gross payroll subject to class 1 NICs;
  • All pay which attracts NICs will be counted, including salary, commission, bonuses and pension contributions;
  • The levy will be reported and paid via the PAYE process;
  • There will be a levy allowance of £15,000 which means that you can minus £15,000 from your total levy bill, i.e., 0.5% of your total pay bill less £15,000;
  • One-twelfth of the levy allowance (£1,250) will be made available monthly and any unused balance carried forward;
  • If you have multiple payrolls, you can reallocate any unused allowance at the end of the tax year;
  • Each month you will have to let HMRC know whether you need to pay the apprenticeship levy and include the levy in your usual PAYE payment to HMRC;
  • Any apprenticeship levy payment to HMRC will be allowable for corporation tax;
  • Once you have declared the levy to HMRC, you will be able to access funding for apprenticeships through a new digital service account;
  • The amount entering the company’s digital service account will be the amount you have available to ‘spend’ on apprenticeship training;
  • The Government will add a 10% top-up to your digital service account;
  • Funds in the digital service account will expire if they are not used with a training provider within 24 months;
  • In the first year of the levy, the company will be able to utilise the funds in the digital account to pay for apprenticeship training and assessment of its own employees;
  • The company will be able to use the funds in its account to pay for training of other employer’s apprentices, for example, someone in your supply chain. Up to 10% can be transferred in this way.
  • Although the levy presents an additional charge on employers with a minimum of a £3 million total payroll bill, it also presents an opportunity to invest in training a new generation of talent. If businesses take time to consider how to maximise the potential benefit of the additional cost, it could be the catalyst to securing and retaining a valuable talent pool.

You can see a list of the current apprentice Standard that businesses can access here. 

Please contact a member of the Sheridans Employment and Business Immigration Group if you have any queries.