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Law for Business

Knowhow - guidance - precedents

31 MAY 2017

Benefits all round from the Apprenticeship Levy

Benefits all round from the Apprenticeship Levy
At least that is what we are being told, as the pot of funds resulting from the Apprenticeship Levy (“the Levy”) can be used to fund all sorts of approved training, not just Apprenticeships.

The purpose behind the Levy is to boost productivity by improving skills, particularly by increasing the number and quality of apprenticeships in the UK across all industries. The target is to have created 3 million new apprenticeships by 2020 – quite a tall order.

Apprenticeships are not new – the trades are built upon the concept of apprenticeships, and service sectors such as accountants and solicitors require a period of apprenticeships to be served, albeit under a different title. The new push for training and skills development is being funded by the new Levy which came into force in April 2017. The provisions are quite complex so take time to investigate how your organisation may benefit from the fund.


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Who has to pay it? If you are an organisation with an annual wage bill of £3m or more (include wages, bonuses and commissions but not benefits in kind), then you will need to pay the Levy. It will therefore not catch small businesses or even some businesses which already rely on apprentices – in fact the Government believe it will only apply to 2% of UK employers (the bigger ones!). If your organisation’s wage bill exceeds the £3m pa mark, you will need to pay 0.5% of that wage bill by way of the Levy. So this is really another tax, although it is ring fenced to provide financial support for training.

How will it be collected? The same way as other taxes; employers will need to report it and pay it to HMRC on a monthly basis through PAYE.

How can it be used? All collected Levy will go into a central fund. Employers you have contributed can then apply to access the fund to pay for accredited training. Accredited training will include traditional apprenticeships, but also training for office or retail workers such as training in diversity, and senior training such as MBA courses. Details of the fund, how to apply and details of accredited courses will be available on the Apprenticeship Services digital portal. The portal can also be used to manage your apprentices and their training, receive funds and pay the training provider. But you will need to register in advance to use the portal.

What can it be used for? It has to be used towards the cost of accredited courses or training. It cannot be used for apprentices’ wages, travel or substance, work placement costs or setting up the apprentice training. However organisations can access more than they have paid in. Accredited courses will be provided by training providers, but it is also possible to have your own accredited apprenticeship programme or to develop an accredited course in conjunction with a third party such as a local college to address specific training needs.

Is there a maximum? Yes there is a funding maximum band dependant on the type of training and the industry. Costs above this have to be paid by the organisation itself. Details are available from Dept for Education.

Can a non-paying organisation benefit? From May 2017, if an organisation falls below the £3m wage threshold and does not pay the Levy, it can still get help with apprenticeship costs through the “co-investing programme” pursuant to which the organisation pays 10% of the cost and the government pays 90% of the cost, subject to a funding band maximum. It is anticipated that non-paying organisations will be able to utilise the Apprenticeship Services portal and benefit from the fund in the same way as contributing organisations from some point in 2018.

Action:

  • Consider if this will apply to you for 2017, but also for future years. If your wage bill exceeds £3m pa at any point you will become liable to pay the Levy so factor this into your annual budget and consider the implications when there is a pay review.
  • Ensure that your payroll processes can calculate the amount of levy you will need to pay and that the processes for reporting to HMRC are in place.
  • Consider your training needs across the whole organisations. Register with the Apprenticeship Services portal and review the training which is accredited and for which you could get funding.
  • Consider your existing apprenticeship programmes and how to get them accredited.
  • Consider working in partnership with others to develop and deliver more tailors or specific training. 
  • If you are below the Levy level, remember it may apply to you in the future, but you may still be able to get help with funding apprenticeships.

For more information see: https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work and other associated links on the Department for Education website.
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