Apprenticeship Levy

With effect from 6th April 2017 all employers with an annual pay bill of over £3 million are required to pay a 0.5% levy on their pay bill each month.  The Government in July 2015 announced the Levy to encourage employers to offer apprenticeships in order to meet their skills and workforce requirements via funded training.  It is the Government’s intention by 2020 to help fund 3 million apprenticeships via the Apprenticeship Levy!

Employers only need to report the apprenticeship levy to the HMRC if they are likely to have a liability to pay it and if their annual pay bill for 2017/18 exceeds £3 million. The Levy is an annual charge based on the employers’ pay bill which is the total amount of earnings subject to Class 1 secondary NICs, including all earnings below the secondary threshold.  The levy is to be reported and paid on a monthly basis.

The pay bill figure should include:

  • Wages
  • Commissions
  • Bonuses
  • Earnings of employees under the age of 21
  • Apprentices under the age of 25
  • & some employer pension contributions that can be subject to class 1 NICs in some circumstances.

The pay pay bill figure should not include any earnings where the employer is not liable to pay Class 1 secondary NICs.

Therefore, the pay will should NOT include:

  • Earnings of employees not subject to UK NICs legislation
  • Payments which are not considered earnings for NIC purposes e.g., pension payments which are not subject to NICs
  • Earnings of employees under the age of 16
  • Benefits in kind that are liable to Class 1A NICs
  • Payments to employees working abroad that are making employee only contributions.
  • Any agency works employed via a recruitment agency. (The recruitment agency is the workers employer and therefore these should not be included in your wage bill)

What does it mean for Multi Academy Trusts (MATs)

A Multi Academy Trust can share the levy allowance between the schools in their Trust.

The rules of the Employment Allowance ‘If at the start of the tax year, 2 or more companies are connected with each other and those companies would otherwise each be entitled to the Employment allowance, only one of those companies can quality for the Employment Allowance for that tax year. The split of the allowance must be agreed at the beginning of the tax year and fixed for that year.  Employers who are part of a MAT will not be able to change the amount of levy allowance in year.

Example

A Multi Academy Trust consisting of 3 academies – MAT (X), MAT (Y) MAT (Z).

MAT (X) & MAT (Y) divide the £15,000 allowance equally between them such as £7,500 each and MAT (Z) receives £0. MAT (X) & MAT (Y) have monthly pay bills of £250,000 (£3m for the tax year). While MAT (Z) has a monthly pay bill of £100,000 (£1.2million annually)

The Apprenticeship Levy due to be paid by the Multi Academy Trust (X) and (Y) per month will be:

 

£
Levy (£250,000 x 0.5%)£1,250.00
Monthly allowance (£7,500 divided by 12 months)£625.00

 

The Levy to be paid MAT (Z) per month will be:

£
Levy (£100,000 x 0.5%)£500.00
Monthly allowance (£7,500 divided by 12 months)(0)
Levy payable£500.00

What do I need to consider?

There are a number of considerations that you need at this time, before the first payment is due in April 2017:

  • How much the levy will cost and whether this cost has been budgeted for within the budget forecast submission to the EFA
  • For multi-academy trusts – How do you wish to allocate the £15,000 annual allowance. Make sure you have the correct procedures in place to ensure compliance with the new system. Registration on the DAS has been available since January 2017
  • How training within the Trust is structured and how that structure can be adapted to:
  • satisfy the requirements to utilise the levy
  • meet the school’s long term development plans

What are the benefits from the Levy?

The levy is designed to encourage employers to support apprenticeships. Employers in England will be able to claim back their levy contribution in the form of digital vouchers from the Digital Apprenticeship Service (DAS), which they can then use to pay for training apprenticeships from 1 May 2017. Any apprenticeships started from this date will be funded according to the new rules.

Vouchers can be used across a MAT. The DAS system will allow school’s to “pool” vouchers and then spend them across the MAT.

In order to access the funds the employer must register the apprentice and training provider details, outline the training programme, the expected duration of training, type of apprenticeship programme and agreed price.

The government has published a table of maximum funding bands per apprenticeship level or standard.

NumberBand Upper Limit
1£1,500
2£2,000
3£2,500
4£3,000
5£3,500
6£4,000
7£5,000
8£6,000
9£9,000
10£12,000
11£15,000
12£18,000
13£21,000
14£24,000
15£27,000

For more information click on the link below:

https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work/apprenticeship-levy-how-it-will-work