Apprenticeship Levy – Your Questions Answered

March 20, 2017 3:23 pm

With the introduction of the Apprenticeship Levy just a few weeks away, we thought this would be a good time to summarise our answers to some of the most common questions we’ve been asked over the past few months. So let’s dive straight in.

What is the Apprenticeship Levy?
The Apprenticeship Levy is a new tax introduced by the government that will come into effect in April 2017. The government has committed to 3 million apprenticeship starts in England by 2020. The levy has been created to fund this commitment, and to encourage employers to train more apprentices to help address skills gaps in the UK.

Who will the Apprenticeship Levy affect?
The Levy will affect all UK employers with an annual wage bill of over £3million, regardless of whether they currently use apprenticeships or not. Those employers with a payroll of under £3million will not have to pay the Levy, but can still access funding for apprenticeships under the apprenticeship co-funding scheme.

How is the Levy payment calculated?
For all UK employers, regardless of size, the levy will be calculated as 0.5% of the total wage bill.  However, all organisations will receive a £15,000 levy allowance from the government. That means that if you have a wage bill below £3 million, your levy ‘bill’ will be covered by your allowance and you won’t need to pay anything.

If you have a wage bill of more than £3million – let’s say £10million for example, the Levy will be calculated at 0.5% x £10million, which is £50,000. After your £15,000 allowance is applied, you will be left with a bill of £35,000 to pay.

How does the government collect the money?
The government will collect the money monthly through the PAYE scheme, alongside your National Insurance and Income Tax contributions.

What happens if we don’t pay our Levy?
The same rules that apply to Income Tax will also apply to the Apprenticeship Levy. Therefore, penalties will be applied for late payments and the same sort of appeals process will be available too.

I heard we can claim our Levy payment back. How does this work?
The £15,000 allowance and the funds you pay towards the Levy are placed in a Digital Apprenticeship Service account. You can recover the Apprenticeship Levy that you have paid through the purchase of apprenticeship training provided by an approved provider registered on the Register of Apprenticeship Training Providers (RoATP).

What can the Levy funds pay for?
The funds in the digital apprenticeship service account are purely to pay for the training costs and assessments associated with apprenticeships. The funds cannot be used for wages or any other expenses associated with your apprentice such as travel costs.

Who decides how much the training costs?
There will be a selection of government-approved training providers to choose from. You directly negotiate the cost of training with them. However, there will be government funding caps set on each apprenticeship.

What happens if I don’t use the funds in my account?
Any unspent funds in your digital account will expire after 24 months. The money is calculated on a FIFO basis (first in, first out); payments are automatically withdrawn from the funds which entered the account first.

How do I get the most out of my Levy fund?
The key is to start your preparations as early as possible. Here at the London College of Apprentice Training we work with our clients to create a unique Apprenticeship Levy Blueprint. This is a multi-year forecast showing the amount of levy you will need to pay alongside a detailed plan to help you maximise the amount you recover each month through apprenticeships. You can find more about this service .

I don’t want to have young, unqualified apprentices in my company, will this fund just go to waste?
No. You are not restricted to hiring new apprentices between 16 and 25 years old. In fact, there are no age restrictions on the apprentices you can hire. You can also use the funds to train your existing employees, providing they undertake an apprenticeship.

Will apprenticeships that started before April 2017 be affected?
Apprenticeships that start before April 2017 will not be affected and will continue to receive funding under the system that is in place at the moment. This funding will continue throughout the duration of the apprenticeship.

That’s the most basic of the Apprenticeship Levy questions covered. If you have more questions you would like answered, why not drop us a line today on 020 3651 4747. Alternatively, why not join us on one of our regular webinars. You can register using the links below.