CAREER DEVELOPMENT INSIGHT
Apprenticeship levy – use or lose it
Jill SmithMCIPPdip, CIPP policymanager, explains how the apprenticeship levy and funding operate
F rom about the start of the last unemployment particularly in people leaving school, college and higher education establishments, such as universities. Government has continually been looking at ways to address this issue as this category of the unemployed presents both a social issue and has the potential to impact a whole generation. Prior to April 2015 the apprenticeship programmes were voluntary, and despite the support of government through financial incentives and the subsidies for training and salaries, they have largely collapsed or been exploited. The apprenticeship levy (‘the levy’) was announced by Chancellor of the Exchequer George Osborne in the July 2015 budget. It was subsequently incorporated into law by Part 6 of the Finance Act 2016 and came into effect at the start of the 2017–18 tax year. Skills and training are devolved policy areas and whilst the levy is UK-wide this article focusses on arrangements for England. To be eligible to undertake an apprenticeship in England an employee’s workplace must be in England and they must spend most (50% or more) of their time in England during their apprenticeship. It does not matter if the employee’s place of residence is or is not in England. major recession, which was 2007, there has been an increase in
When you need to pay it The levy is paid through the pay as you earn (PAYE) process in the same way employers pay income tax or National Insurance contributions. The levy is payable by all employers with an annual pay bill in excess of £3,000,000. This includes smaller employers that are connected to other businesses or charities for the employment allowance if in total they have an annual pay bill of more than £3,000,000. ...levy paying employers need to register for an apprenticeship service account... The ‘pay bill’ is defined as earnings such as wages, commissions and bonuses liable to class 1 secondary National Insurance contributions. The levy is payable at 0.5% of the employer’s pay bill. If an employer is not connected to another business or charity they will have a levy allowance of £15,000 each year, which reduces the amount payable by £15,000 across the year. This means that only employers with an annual pay bill of more than £3,000,000 will pay the levy. Associated companies or charities will only
have one £15,000 allowance to share between them.
How to invest the levy All levy paying employers need to register for an apprenticeship service account (‘the account’). Once this has been actioned the money can then be paid across into this account. Funds in this account can only be used for apprenticeship training and assessment. The account is currently only available to employers that pay the levy or to non-levy paying employers in receipt of a transfer of funds from a levy paying employer. The amount in the account is calculated by multiplying the monthly levy paid to HM Revenue & Customs (HMRC) by the proportion of the employer’s pay bill paid to their workforce in England (referred to as the ‘English percentage’), plus a 10% top up on this amount from the government. These funds are then available for spending in England. Often employers are not aware of the full range of occupations and levels covered; however, this link – http://bit. ly/2Z7K8yY – shows what standards are available and also the variety of levels available to benefit employees at different stages in their career. While lower-level 16–18 apprenticeships are important, a large range of higher-level apprenticeships are on offer which are perfect for up-
| Professional in Payroll, Pensions and Reward | September 2019 | Issue 53 12
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