Apprenticeship Levy 2017

Beginning April 6th, large employers will begin contributing to a new Apprenticeship Levy designed to create 3 million additional apprenticeships by 2020. But how will it affect your business?

Which businesses are affected by the Apprenticeship Levy?

All employers operating in the UK with a pay bill more than £3million each year. But the Levy does not affect how companies fund apprenticeship programmes started prior to 1 May 2017.

What is a pay bill?

A pay bill is the total amount of your employees’ earnings subject to Class 1 National Insurance contributions:

1. Wages
2. Bonuses
3. Commissions
4. Pension Contributions

The government will not charge the levy on other employee payments such as benefits in kind (i.e. company cars, travel/entertainment expenses, health insurance, childcare).

How do you pay the apprenticeship levy?

• By reporting to HMRC via the PAYE process
• Each month the company will have to let HMRC know whether they need to pay the apprenticeship levy and include the levy they need to pay in the usual PAYE payment to HMRC

Levy rate and allowance

• Employers with an annual pay bill of more than £3million will need to spend 0.5% of their total pay bill on the apprenticeship levy
• The government are introducing a ‘levy allowance’ of £15,000 per year. This would mean the total amount a company would need to spend would be 0.5% of your pay bill, minus £15,000.

Calculating what you have to pay

• Calculate what your total pay bill is
• Work out what 0.5% of your total pay bill is;
• Subtract the £15,000 allowance.

Example

An employer with an annual pay bill of £8,000,000

Levy sum: £8,000,000 x 0.5% = £40,000

Subtract levy allowance: £40,000 – £15,000 = £25,000 annual levy payment

Paying the Apprenticeship Levy

Employers required to participate will begin making Apprenticeship Levy payment in May 2017. Levy payments will be included in your PAYE payments.

Accessing apprenticeship levy funds

Employers will access apprenticeship funding through a new digital apprenticeship service account that will allow employers to:

• Select an apprenticeship framework or standard
• Select training providers
• Select the assessment organization
• Post apprenticeships

Top-up Funds

The government is adding 10% to the funds in your apprenticeship levy account. So, for every £1 you add to your digital account you will have £1.10 to spend in England.

Expiration of Apprenticeship Levy Funds

Apprenticeship Levy funds are available for 24 months after entered into your digital account. After 24 months unused funds expire.

Should you have any questions feel free to reach out to our help line. DLP advisors are available to answer any questions you may have at 0330 400 4495.

This post was authored by Lauren, a legal adviser in DLP’s Leeds office, with information from Gov.uk.