From April 2017, employers with a wage bill of £3 million or more will pay a 0.5% levy to fund future apprenticeships into 2020. In exchange for this contribution eligible employers will receive a £15,000 allowance – available through the Digital Apprenticeship Service (Online tools will be available over the next year, and users will be able to register from January 2017) – to offset the costs.
When an organisation is calculating if they will be subject to the levy they should include the total earnings of the company after Class 1 secondary national insurance contributions (NICs). Although earnings below the secondary threshold are not counted when calculating if employers are subject to the levy, they will be included for the purposes of calculating the amount of levy due.
Earnings will include any remuneration or profit coming from employment, such as wages, bonuses, commissions and pension contributions that businesses pay NICs on. However, the government are not intending to charge the levy on other payments, such as benefits-in-kind.
To offset the cost of this levy organisations will receive a monthly allowance of £1,250 towards apprenticeship training and any unused allowance can be carried over for 18 months.
Should an employer have unused allowance after paying the levy in the previous tax year, they can receive a credit to offset against their PAYE liabilities. The credit will also reduce the amount of levy paid. Funds will automatically expire 18 months after they enter an account unless they are spent on apprenticeship training. However, the government has suggested it will let users know “in good time” whether any funds are due to expire.
We await further information from the Government about how this will work in practice however skills minister Nick Boles has confirmed that the levy will be implemented as planned despite the Brexit vote of last week.
For further information on this or any other employment matter please contact the ProAktive HR team on 01302 341344.
By Louise Addison Dip Mgmt (Open) Assoc CIPD , HR Business Adviser,