The Apprenticeship Levy has a reputation for being a complicated beast and many people have expressed their confusion over how it works.
However, it really needn’t be a complex area to navigate, as it's actually fairly straightforward once you’re in possession of all the facts.
So that confusion can become clarity, we’ve set out to answer the most common questions people have about the levy.
What is the Apprenticeship Levy?
The Apprenticeship Levy is an amount of money that employers in the UK pay towards the funding of Apprenticeships. It’s a bit like a tax but instead of HMRC spiriting away the funds, they're held until employers choose to spend them on training.
It was introduced in April 2017 with the aim of helping the UK government meet their target of creating 3 million Apprenticeships by 2020.
Who pays the Apprenticeship Levy?
Technically, it applies to all employers in the UK, including those in the public or voluntary sector. However, as there’s a £15,000 ‘allowance’ (essentially a payment threshold), only employers with a wage bill of over £3 million are required to pay the levy.
Can organisations opt out of paying the Apprenticeship Levy?
There’s no way for you to opt out of paying the levy - even if you don’t employ any apprentices.
How much are employers charged?
The levy rate is set at 0.5% of your annual wage bill, minus the £15,000 allowance.
Here’s an example calculation for an employer with a wage bill of £4 million:
£4,000,000 x 0.5% = £20,000 - £15,000 = £5,000 to pay into their levy fund.
How are the funds collected?
Each month you’ll need to report how much levy you owe to HMRC using your Employer Payment Summary.
You’ll make the payments each month in the same way you make your payments for Income Tax and National Insurance contributions. If there’s a change in your circumstances and you end up making any over-payments, you’ll be refunded via a PAYE credit.
How are the funds accessed?
If you haven’t already done so, you’ll need to set up a Digital Apprenticeship Service account. Once you’ve paid your funds to HMRC they’ll be transferred over to your account. You’ll then be able to use this to pay for your apprentices’ training.
What are government top-ups?
To give an added boost to your fund the government will top it up by 10%. This means that for every pound you pay into your digital account the government will add on an extra 10p.
What can the funds be spent on?
You’ll only be able to spend your apprenticeship levy fund on the cost of your apprentices’ training, assessment and certification. All other costs such as wages will have to be paid from an alternative source.
Also, your chosen training provider must be listed on the Register of Apprenticeship Training Providers (RoATP). This ensures that your training provider has been properly vetted and will deliver high-quality training that meets the required government standards.
What age do apprentices need to be?
The great thing about the apprenticeship levy is that there are no age restrictions for apprentice, so you can employ people of all ages.
Another great aspect is that apprentices don’t have to be new hires, you can use your levy funds to provide training for current staff members too.
Even staff that have university degrees can undertake an apprenticeship if they are starting a completely new role or need new skills and knowledge to perform their existing job.
The government is still keen to encourage employers to create new career opportunities for young people, so they offer extra incentives if you take them on. For every 16 to 18-year-old you enrol as an apprentice they’ll pay you an extra £1,000 - this offer is open to all organisations whether levy-paying or not.
What happens if you don’t spend all your levy funds?
Quite simply, if you don’t use it, you’ll lose it! The funds in your digital account will expire and you won’t be able to reclaim them.
If you think you’ll struggle to use all your levy funds you can currently transfer 10% of it to support businesses in your supply chain taking on apprentices. Following changes announced in the Autumn 2018 Budget, this is due to rise to 25% from April 2019.
How can non-levy paying employers get funding?
You can still get funding from the government for apprenticeship training even if you’re not paying into the levy as the government will cover some of the costs for you.
This process is known as ‘co-investment’ and means that the government will currently cover 90% of your training costs if you pay the remaining 10%. Your contribution is set to reduce to 5% sometime in 2019.
Where can I get help or advice?
We’d be more than happy to help you navigate the ins and outs of the apprenticeships levy.
Contact our apprenticeship consultants on 0800 092 2072 or view our full range of digital-first HR, finance and management apprenticeships.