Apprenticeship Levy – Frequently Asked Questions

We are working with businesses to help them understand the changes surrounding the Apprenticeship Levy  – which will come into force in 2017.

Below are some of the frequently asked questions about the levy, how it will work and impact on businesses and apprenticeship funding in general.

If you have any questions please don’t hesitate to get in touch with us by calling 01254 54659 or emailing [email protected] 

Why is the levy being introduced?

The apprenticeship levy is a key part of the Government’s apprenticeship reform agenda, first announced by former Chancellor George Osborne as part of the drive for 3 million starts in this parliament – before 2020.

When will employers need to start paying the levy?

The levy will be introduced in April 2017, with the first payment of the Levy in May 2017.

Who needs to pay the levy?

The levy will apply to all employers across all sectors who have a paybill in excess of £3m per year.

How will the levy be paid?

Monthly through Pay As You Earn (PAYE) alongside income tax and National Insurance to HMRC.

How much will an employer pay?

The levy will be calculated via 0.5% of an employer’s paybill (if above £3m annually)

Is the 0.5% payable on a company's UK payroll bill gross or net?

Gross.

Are there any allowances available?

Employers will receive an allowance of £15,000 to offset against payment of the levy – which means no employer with a paybill below £3m will pay any levy.

What can the levy payments pay for?

The levy can contribute to the cost of any Apprentice, Higher Apprentice or Degree Apprentice training.

How can I spend/utilise the levy fund?

It must be spent on the external apprenticeship training provided to that individual on an approved apprenticeship. It cannot be spent on anything else such as internal training or apprentice salaries.

Can I use the Levy towards existing staff?

If the member of staff is acquiring new skills and knowledge through a promotion, new role or added responsibilities, then yes this is allowed under current funding rules.

As the levy is taken monthly, is the levy based on £3m annual or monthly paybill?

It will be based on your monthly paybill with any under or over payments managed in the same way as other PAYE payments.

Can the levy pay for Apprentices in an employers supply chain?

There is some opportunity for employers to utilise a portion of the apprenticeship levy up to a certain level yet to be confirmed in the consultation.

How will employers access Apprentices

Employers will choose and pay for the apprenticeship training and assessment they want through the Digital Apprenticeship Service.

Does the calculation include temporary worker or employees on fixed term contracts or seasonal hours ?

Anyone paid via an employers payroll through the PAYE system is included in the paybill calculation for the level of levy contributions.

How long do I have to spend my levy?

Funds will expire 24 months after being credited as vouchers

Can a business spend over their levy contribution?

Yes, businesses can top up their account through their own contributions

I won’t pay the levy – what about me?

Smaller companies (under a wage bill of £3million) will not have to directly pay the Apprenticeship Levy as they will receive a Levy allocation of £15,000 for the tax year. However, they will be able to attain funding alongside a contribution which will equal £1 from the employer for £9 of Government funding.

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