January 19, 2017
What is this Apprenticeships Levy?
In the 2015 Autumn Statement George Osborne announced a new Apprenticeship Levy on employers with the aim of covering the cost of apprentices’ training. The levy will apply to larger companies in the construction industry. It will replace all taxpayer funding of apprenticeships for companies of all sizes.
The levy is being introduced to help fund, and encourage employers to invest in high quality apprenticeship programmes which the government sees as crucial for raising UK productivity and staying globally competitive.
The levy is set to raise £3 billion a year (£2.5 billion for England), helping to fund the government’s target of 3 million apprenticeships in this term
Who will be subject to the levy?
The levy threshold is calculated by size of payroll. It will affect employers with a UK payroll bill of more than £3m.
How much is the levy?
The levy amount is 0.5% of the companies overall payroll bill. Every employer gets an allowance of £15,000 to offset against the amount they owe. (See download for examples)
How is the levy paid? And to whom?
The Apprenticeship Levy will become a mandatory tax from April 2017. It will be payable monthly to HMRC, through the Pay as You Earn (PAYE) system along with an employer’s income tax and national insurance contributions
Will construction firms need to pay both the AL and the CITB Levy?
It is estimated that just under 600 construction companies (at a group level) will have to pay the AL as well as the CITB Levy. This will have important implications for the CITB levy. CITB will be formally consulting with the industry on a Levy proposal for the new Levy Order from 2018.
CITB has agreed a temporary Transition Package with industry, for firms paying both levies that year. Under this arrangement these firms will be able to claim CITB funding at an enhanced rate, capped at their level of Apprenticeship Levy contribution.
How is the levy relevant to smaller businesses?
Smaller businesses will still be able to access the new Digital Apprenticeship Service, which will provide online support and guidance to enable them to manage their apprenticeship programmes and source relevant training.
The government has indicated that unused levy funds, (i.e. those that have gone beyond 18 month expiry date) will be used by the government to fund apprenticeships training for SMEs.
Good or Bad?
The Levy has received very mixed reviews but it is agreed that it will raise the profile of apprenticeships amongst all businesses, and this likely to have an impact on small businesses that are considering apprenticeships programmes.
Free Download Available
Please download a copy of the CITB Fact sheet Apprenticeship Levy Fact Sheet Jan 2017 CITB