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The Carval HR Software Blog

Are you ready for the Apprenticeship Levy?

Posted by Emma Clare

22/03/17 14:50

From 6 April 2017, employers with a paybill of more than £3 million per year will be liable to pay a new apprenticeship levy.

Employers operating in England and that pay the apprenticeship levy will be able to access funds for the training and assessment of apprenticeships through a Digital Apprenticeship Service Account.

To help you stay ahead and plan for the upcoming change, here is a selection of practical guidance and information to help your business prepare, compiled by XpertHR.

Apprenticeship Levy XpertHR.jpg

Picture courtesy of XpertHR

What is the apprenticeship levy?

The apprenticeship levy is a levy on UK employers to fund the costs of apprenticeship training and assessment. The levy will be set at 0.5% of an employer's paybill (the paybill is the employer's total employee earnings subject to Class 1 secondary national insurance contributions). The levy is expected to come into force on 6 April 2017.

Each employer will have an annual allowance of £15,000, which will be offset against the levy. In effect, only employers with a paybill of more than £3 million will be liable to pay the levy (because 0.5% of £3 million is £15,000). Companies and charities that are connected in a group structure will have one £15,000 allowance to share between the group. The levy will be paid through PAYE on a monthly basis. The allowance will also be applied on a monthly basis and any unused allowance can be carried forward to the next month.

(For payroll software that supports the Apprenticeship Levy discover Carval Uniwage >>)

The new digital apprenticeship service will distribute the funds raised by the levy for employers to use on apprenticeship training and assessment in England. Separate arrangements for funding apprenticeships apply in Scotland, Wales and Northern Ireland, as this is a devolved matter.

The Government has published guidance for employers on how the apprenticeship levy and the new funding system will work.

How will an employer be able to access funding from the apprenticeship levy?

Employers that operate in England and that pay the apprenticeship levy will be able to access funding through a digital apprenticeship service account. Each employer will be able to register its own individual account, linked to its PAYE scheme.

The Government will pay funds into individual accounts on a monthly basis. The employer can use the money to pay for the training and assessment of apprentices in England. The Government will top up the amount paid into the account by 10% on a monthly basis.

The Government has said that it will use the home addresses of employees, from PAYE records, to work out what proportion of an employer's paybill relates to employees living in England. This will determine the amount that is paid into the employer's account. Separate arrangements for funding apprenticeships apply in Scotland, Wales and Northern Ireland, as this is a devolved matter.

The employer must spend the funds in its digital account within 24 months of them being paid in. Employers will be notified in advance when funds are due to expire.

The levy is expected to come into force on 6 April 2017 and the new system for apprenticeship funding in England is expected to operate from 1 May 2017. The Government has published guidance for employers on how the apprenticeship levy and the new funding system will work. It has also published final details of its funding policy for England, including funding bands that will apply for existing apprenticeship frameworks and apprenticeship standards from 1 May 2017.

What will employers be able to spend apprenticeship levy funding on?

Employers will be able to spend apprenticeship levy funding on apprenticeship training and end-point assessment (the assessment of apprentices by an independent organisation, required before they can complete the apprenticeship), either under an apprenticeship standard or an apprenticeship framework. The funding can be spent only with an approved training provider or an approved assessment organisation.

The Government has said that it recognises that some employers would like to fund apprenticeships for other employers, for example in their supply chain. It has said that it is committed to allowing employers to transfer 10% of their funds to another employer or to an apprenticeship training agency, and that this will be introduced in 2018.

Employers will not be able to use the apprenticeship levy to fund other costs of apprenticeships or other training costs. Government guidance states that the levy cannot be spent on:

  • wages;
  • statutory licences to practice;
  • travel and subsidiary costs;
  • managerial costs;
  • traineeships;
  • work placement programmes; or
  • the cost of setting up an apprenticeship programme.

Employers will not be able to use the levy to fund apprentices who have already been accepted onto an apprenticeship programme before the new system for apprenticeship funding in England comes into effect on 1 May 2017. The apprenticeship levy itself is expected to come into force on 6 April 2017.

The Government has published guidance for employers on how the apprenticeship levy and the new funding system will work. It has also published final details of its funding policy for England, including funding bands that will apply for existing apprenticeship frameworks and apprenticeship standards from 1 May 2017.

How will employers that do not pay the apprenticeship levy be able to fund apprenticeships?

Not all employers will be liable to pay the apprenticeship levy. The levy is set at 0.5% of each employer's paybill, but there will be an annual allowance of £15,000 for each employer to offset against the levy. In effect, employers with a paybill of £3 million or less will not be liable to pay the apprenticeship levy (because 0.5% of £3 million is £15,000). Employers that do not pay the levy will be able to receive government funding towards the costs of apprenticeship training and assessment through co-investment.

The Government will pay 90% of the price agreed with the training provider, up to the maximum allowed by the funding band for the relevant apprenticeship standard or framework.

Employers with fewer than 50 employees will not be required to pay a contribution to the cost of the apprenticeship where the apprentice is aged 16 to 18 inclusive, or aged 19 to 24 inclusive if he or she has previously been in care or has a local authority education, health and care plan. The Government will pay 100% of the training and assessment costs in these circumstances.

The new system of apprenticeship funding in England is expected to come into force on 1 May 2017.

How will the apprenticeship levy affect employers?

The apprenticeship levy, which the Government hopes will help create three million new apprentices by 2020, is due to come into force in April 2017. But ahead of implementation, there are a number of key questions that employers should be asking. Matthew Lewis, employment partner at Squire Patton Boggs, explains. Register with XpertHR to read this article

Topics: HR and Payroll News

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