The Apprenticeship Levy is a new tax being introduced by the Government to fund apprenticeships.
The Government have been trying to encourage employers to contribute towards apprenticeship training for a number of years. In their view this has not happened; hence they are now using the taxation system to give large employers no choice but to fund apprenticeships.
The Levy will be collected by HRMC as they collect other taxes from April 2017. The start date for the new apprenticeship funding system will be on 1st May 2017. Any apprenticeships started from this date will be funded according to the new rules.
The Levy will be collected as a monthly deduction from your payroll. The funds will not appear in an employers digital account until just before the end of May 2017, for Levy paid on their April payroll.
Each organisation will have their own individual Digital Account and the funds will be held in there. Funds will expire 24 months after they enter your Digital Account unless you spend them on apprenticeship training with a training provider. Whenever a payment is taken from your Digital Account, the service automatically uses the funds that entered your account first.
The Levy will be set at 0.5% of payroll, minus a £15,000 Allowance. Hence if your payroll is £10M then the Levy will be £10M x 0.5% -£15K = £35,000. If your payroll is £100M the Levy will be £485,000. Any business with a payroll of LESS than £3M will not be impacted by the Levy and will pay nothing. Use our Levy Calculator at the bottom of the page to see how much you will be paying.
Yes you may be able to reclaim some of the money if you deliver parts or all of some training programmes.
The levy spend must be spent on external apprenticeship training from an approved apprenticeship provider. The spend cannot be used for anything else such as to pay apprenticeship wages or internal training.
For further information see our ‘How to use your Levy section’.
The Levy can be spent on existing staff training as well as recruitment of new apprenticeships. You can also spend the money with your supply chain.
The Levy must be used for apprenticeship training, delivered by a registered apprenticeship training organisation. You cannot use the Levy for apprenticeship wages or management of the Levy. This is a significant issue to consider; employing new apprentices in a new role is a double cost for organisations paying the Levy; not only will you have to pay the Levy but also the apprenticeship wages that the new role will attract.
The government will apply a 10% top up to monthly funds that are entered in Digital Accounts for apprenticeship training i.e. every £1 will be increased to £1.10 in value.
Organisations have 24 months to use the Levy. Any funds that are not spent after 24 months will be removed from your Digital Account and will be used to fund other organisations, including SME’s.
This timeframe was changed from 18 months by Government on 26th October 2016.
Previously any potential apprenticeship learner who had a degree was not eligible for apprenticeship funding. This exemption is being lifted with the introduction of the Levy; so from April 2017 employees with a degree can undertake apprenticeship training. This means that managers with technical degrees can undertake management training; or general employees doing roles that are not relevant to their degree can be retrained and upskilled into their new roles through apprenticeship training.
If you overspend the amount in your Digital Account then you will need to pay more into your Digital Account. However, you will not need to put the full amount of any overspend as the Government will fund 90%, with the employer funding just 10%.
If payroll fluctuates month on month; either because the business is growing, seasonal variations or due to payment of bonuses/commissions then the amount being transferred to the Digital Accounts will vary as well. This can make planning to spend the Levy more difficult, which Levy Britain will be able to help and advise you with.
Each apprentice will have their own band, which will indicate the amount of money employers can spend on them. The band will vary according to the level and the type of apprenticeship. Currently there are 15 funding band limits ranging from £1500-£27000 and every apprenticeship will be placed into a funding band. The upper limit of each funding band will cap the maximum amount of digital funds an employer can use towards an individual apprenticeship.
This is to ensure that apprenticeships represent the best quality and value for money to the employer. Employers can negotiate directly with training providers on the best price for training required. It is up to the employer on whether they wish to spend more than the funding limit.
Employers who are also providers of apprenticeship training will be able to register as a training provider. They will be paid for the apprenticeship training they deliver. Any training providers with a payroll exceeding £3 million will be liable for the levy tax.
The Levy will be deducted across the UK; however, because education is a devolved function across Scotland, Wales and Northern Ireland the Levy funds raised will not all appear in the Digital Accounts. Instead the monies raised in Scotland, Wales and Northern Ireland will be sent to the devolved governments; who are responsible for policy on education, including apprenticeships. Hence the money will be deducted, but not appear in the Digital Account. The devolved Governments have not yet announced how they will use these funds; however, it is very unlikely that they will use them as the English government has planned. We are awaiting further clarification from Scotland, Wales and Northern Ireland.
- All organisations impacted by the Levy could register to become an apprenticeship provider, and in doing so would be able to deliver apprenticeships themselves and draw down funding back into the organisation. To do this would involve:
- Registering with the Skill Funding Agency as an approved supplier
- Registering with Awarding Bodies
- Developing infrastructure, systems and processes (also necessary to register with above organisations). – Recruiting or training staff with Assessment/Verification qualifications
- Investment in management of the programme
- Becoming an apprenticeship provider will also mean that Fortis will be subject to Ofsted scrutiny.