As apprenticeships become more appealing to businesses and school leavers looking to take their first steps on the career ladder, the Government are looking for new, efficient ways to ensure all involved benefit. As a result, Government funded apprenticeships are changing – from 6th April 2017 employers with a payroll in excess of £3 million will be required to subsidise apprenticeships through the new Apprenticeship Levy.
No matter in which sector your business operates, a levy of 0.5% of your annual wage bill will be applied and paid through PAYE procedures. HMRC have established a £15,000 annual levy allowance that provides businesses with a buffer, meaning that only companies paying out over £3 million in wages will be affected. This is calculated in relation to total earnings subject to Class 1 secondary National Insurance Contributions.
The £15,000 levy allowance for each tax year will operate on a monthly basis and any unused allowance will carry over to the next month, allowing increased flexibility. This works out as £1,250 per month, so a £1,000 liability in month one will see the month two allowance increase to £1,500.
Some industries already operate levy schemes. Unfortunately you still have to pay the apprenticeship levy regardless of whether you pay into another system.
How does this benefit my business?
When your levy has been declared to HMRC, businesses in England will be able to access funding via a digital Apprenticeship Service Account. This will provide a hub to enable training and apprentice assessments to be undertaken, as well as linking you in to training providers who will provide key support to your apprenticeship programme. You will be able to create an account in January 2017 and we would recommend doing so as soon as possible to familiarise yourself with what it offers. Once registered, you’ll be required to link your PAYE schemes to your account. It’s also worth noting that you will be able to use multiple accounts if you wish to separate your schemes.
Businesses must be aware that funds are time-limited and will expire eighteen months after entering your apprenticeship service account, thus ensuring you spend the funds on apprenticeship training. Funds leave on a first in, first out basis, meaning that expired funds will be kept to a minimum. You will also be informed of the impending expiry of funds for the same reason.
Regardless of whether you are required to pay the levy, the digital apprenticeship service offers a range of benefits in relation to apprenticeships. It will provide guidance and support regarding apprenticeship frameworks and standards, allow you to hand-pick training providers that suit your needs, post apprenticeship vacancies and choose assessment organisations.
Whilst these impending changes have the potential to cause problems if not handled appropriately, there is plenty of information available to ensure things run smoothly. It is essential to read and understand the full range of propositions, as there are some more complex caveats that require consideration. These include factors relating to redirecting funds to other employers, topping up funds in your digital account, employers operating in other parts of the United Kingdom and levy calculations for charities and connected companies.