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The Apprenticeship Levy – what is it

Hadyn Luke posted this on Wednesday 8th of June 2016 Hadyn Luke 08/06/2016


The Apprenticeship Levy, the subject of this blog, was first announced in the government’s 2015 Summer Budget. The levy is to apply to employers across the UK and is intended to come into force in April 2017.

Apprenticeships can bring many benefits to employers (see our blogs on: Five keys benefits of apprenticeships for employers and You’ve taken on an apprentice – what next?) but this new levy marks a change to how they are funded – and not only for those employers who will have to pay the levy.

Who will contribute to the levy?

UK employers with a pay bill over £3m a year, calculated on all earnings, including wages, bonuses, commissions and pensions that National Insurance Contributions (NICs) are paid on, are expected to pay a levy of 0.5%

The levy will be allowable for Corporation Tax and groups of connected employers will be required to decide what proportion of the levy allowance each employer in the group will be entitled to. 

How is the Apprenticeship Levy paid?

Through the PAYE system – just like tax and NIC.

How will this affect smaller employers?

Changes to the way apprenticeship training is funded will be rolled out across the UK, whether or not your company is paying the levy. Companies that are not required to pay the levy (if your pay bill is under £3m a year) will share the cost of the apprenticehsip with the government in what is being called a “co-investment”. More details on the rates are due to be revealed by the government shortly, however it is expected that what ever amount the employer invests, they will re-coup via 'cash-back' incentives set by the government based around the succesful completion of an apprenticehsip programme.

How do companies access apprenticeship funding?

From January 2017, it is expected that companies will be able to create a digital apprenticeship service account, which can be used to pay for training and assessment for apprentices. These must be spent within a fixed time frame.

It will also give access to information about training providers to support the delivery of apprenticeship programmes.

Different systems will be accessed depending on whether the business is based in England, Scotland, Wales or Northern Ireland, through the relevant apprenticeship authority.

Smaller employers using the co-investment method shoudl not expect to use this new system until 2018. From April 2017, they can select a training provider and an assessment organisation (see our blog on: Are all apprenticeship providers the same?) and payment is organised through the training provider (CMS Vocational Training Ltd).

Find out more

More detail on the Apprenticeship Levy is available on the government website: https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work/apprenticeship-levy-how-it-will-work.

You can also email any questions to nationalhelpdesk@apprenticeships.gov.uk or call free on 08000 150 600.

Further guidance will be published by the government later this month (June) and in October and December 2016, before the Apprenticeship Levy comes into force.

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