Have you calculated your Levy?
Highlights from the update
So what does all of that really mean? Read our summary of the key updates from the new guidance for employers:
How will the levy be paid?
The levy will be paid by employers in any sector with a pay bill of more than 3 million per year, and will be charged at 0.5%. The levy will be paid to HMRC through PAYE. You will calculate, report and pay your levy to HMRC, through the PAYE process alongside tax and NICs. If you have calculated that you will pay the apprenticeship levy, you will need to declare this and include it in your usual PAYE payment to HMRC.
What counts as the pay bill?
The pay bill will be calculated based on the total amount of earnings subject to Class 1 secondary NICs. Earnings include any remuneration or profit coming from employment, such as wages, bonuses, commissions, and pension contributions that you pay NICs on.
How do I calculate how much I need to pay?
You will pay the levy on your entire pay bill at a rate of 0.5%. However, you will have a levy allowance to offset against this. The levy allowance is worth 15,000 for each tax year. This means the levy is only payable on pay bills over 3 million (because 0.5% x 3 million = 15,000).
Annual pay bill of 7,000,000
Apprenticeship levy of 0.5% x 7,000,000 = 35,000
Minus 15,000 allowance = 20,000 annual levy payment
How do I access my levy fund?
Funds will be accessed through a new digital apprenticeship service account. Employers will need to register to create an account, and link it to their PAYE schemes. You will be able to see funds appear in your digital account monthly.
Employers will be able to use this to pay for training and assessment for apprentices in England. The service will also help employers find training providers and assessment organisations.
When you agree to buy apprenticeship training from a particular training provider and the apprenticeship has started, monthly payments will automatically be taken from your digital account and sent to the provider.
The digital apprenticeship service will support the English apprenticeship system. Scotland, Wales and Northern Ireland will have their own arrangements for supporting employers to access apprenticeships – but there are no further details on this yet.
What can I spend levy funds on?
Funds in your digital account can only be used towards the costs of apprenticeship training and end point assessment. This must be with an approved training provider and assessment organisation.
For employers that wish to provide apprenticeship training themselves, they must become an approved training provider.
Funds can’t be used on other costs associated with apprentices or wider training effort. For example wages, statutory licences to practise, travel and subsidiary costs, managerial costs, traineeships, work placement programmes or the costs of setting up an apprenticeship programme.
How do the top-ups work?
Government will apply a 10% top-up to the funds you have to spend on apprenticeship training in England. It will be given monthly, at the same time the funds enter your digital account. That means for every 1 that enters your digital account to spend in England on apprenticeship training, you get 1.10.
Will my funds expire if I don’t use them?
Funds will expire 18 months after they enter your digital account if you don’t spend them on apprenticeship training – this will also apply to any top-ups. Your digital account will let you know in good time when any funds are due to expire so that you can arrange to spend them.
What will happen to apprentices that started before April 2017 but are still on-programme?
All apprentices who started their apprenticeship programme before April 2017 will be funded for the full duration of the apprenticeship under the terms and conditions that were in place at the time the apprenticeship started. If you pay the apprenticeship levy, you will not be able to use the funds in your digital account to pay for these apprenticeships.
How will the levy work for connected companies or charities?
Where a group of employers are connected they will only be able to use one 15,000 allowance. If you are part of a group of connected employers, you must decide what proportion of the levy allowance each employer in the group will be entitled to. This decision must be taken at the beginning of the tax year and will be fixed for that tax year.
How will I be affected if I don’t need to pay the levy?
If you don’t pay the levy, you won’t need to use the digital apprenticeship service to pay for apprenticeship training and assessment until at least 2018.
But, when the new funding system begins in April 2017, you can access the digital apprenticeship service to choose the training provider, and assessment organisation for your apprenticeship programme using the registers available.
Employers that don’t pay the levy will be expected to contribute towards the cost of apprenticeship training, and Government will pay the rest (up to the maximum amount of funding available in the band for that apprenticeship).
How will this work for employers with operations across the UK?
Education and training is a devolved policy, which means that authorities in each of the UK nations manage their own apprenticeship programmes. Government are working with the devolved administrations to make this work for employers that have operations across the UK. The current advice is to contact the relevant apprenticeship authority for more information about funding in other parts of the UK.
How can I use the digital apprenticeship service?
Employers can use the digital apprenticeship service whether they pay the levy or not. They will help employers to:
By 2020, all employers will be able to use the digital apprenticeship service to pay for training and assessment for apprenticeships.
To read the Government guidance in full,
Let us help you to get the most out of this new government linked initiative for apprenticeships and training.
Contact us to book a consultation with our levy team today on 08000 50 23 24