Are you ready? From 6 April 2017 over a third of employers are liable to pay a new Apprenticeship Levy

What is it?

Despite the apprenticeship levy becoming payable in less than a month, new research undertaken by City and Guilds has suggested that 33% of UK employers eligible to pay the levy remain unaware of its presence. 

Under the scheme, UK employers whose annual pay bill exceeds £3 million will be required to pay 0.5% of that annual pay bill towards the cost of apprenticeship training. The new levy forms part of the Government’s initiative to fund 3 million new apprenticeships for over 16 year-olds by 2020.

How is it paid?

The levy is payable to HMRC monthly via the PAYE process alongside income tax and NI. 

What's in it for employers?

Employers who are required to pay the levy will receive an annual allowance of £15,000 to offset against the cost of apprenticeship training, assessment and certification from approved providers. From May 2017, smaller employers will have access to the same registers of approved training providers with Government funding available for up to 90% of the training costs, subject to up per limits of relevant funding bands. 

The Government will apply a 10% top-up to the funds that you have for spending on apprenticeship training in England. That means for every £1 that enters your account to spend in England on apprenticeship training, you get £1.10.

What should employers do now?

We recommend that you register for the online digital system which has been set up to support the levy. This will help you manage your spending, as well as help you to recruit apprentices through various training providers. 

Click here to register to manage your apprenticeship funds

Did you know?

  • There are no age restrictions for the apprentice to be eligible for the new funding- you can use the funds to train an apprentice of any age.
  • You can spend your levy funds on apprentice training for either existing staff or new recruits. Existing staff will only be eligible if the apprenticeship is relevant to their role and the most appropriate way of progressing/ developing their career.
  • The apprenticeship training must last at least 12 months.
  • The apprentice must spend at least 20% if their time on off-the-job training- this training must be directly relevant to the apprenticeship framework or standard.
  • You must give apprentices time off to study during their working hours. The number of hours and study mode is dependent on the standards and qualifications included.
  • You do not have to use the job title "apprentice" for new recruits but the apprentice must sign an apprenticeship contract of employment.
  • There is an apprentice minimum wage but salaries are often much higher than this in some sectors. You should research current vacancies in your sector as a benchmark on the National Apprenticeship Service vacancy website.
  • The funding is available for employers based in England only. Apprenticeships in Northern Ireland, Scotland and Wales have separate arrangements.
  • When an apprenticeship has started, monthly payments will be automatically taken from your digital account and sent to the training provider. This spreads the cost over the lifetime of the apprenticeship. You will see funds entering your digital account each month as you pay the levy, and funds leaving the account regularly each month as you pay for the training.
  • Funds will expire 24 months after they enter your digital account unless you spend them on apprenticeship training. Your apprenticeship service account will let you know in good time when any funds are due to expire so that you can arrange to spend them if you wish.
  • You can buy-in training from a provider or deliver the training yourselves, but the training must be delivered by an approved provider. If you want to "DIY", your organisation needs to register as an approved provider and will be subject to Skills Funding Agency (SFA) quality arrangements and OFSTED inspection.
  • You must retain all documentation relating to the calculation of the levy for a minimum of 3 years.
  • If you are part of a group of connected employers, you must decide what proportion of the levy allowance each company in the group is entitled to. This decision must be taken at the beginning of the tax year and fixed for that year.

How can we help?

Please get in touch with one of our specialists who can provide further guidance.

Details of a roundtable discussion where we will discuss the levy in more detail will be available shortly.

In the meantime, click here for the Department for Education's useful guide on the Levy: Guide to Apprenticeship funding

Key Contacts

Helen Almond

Helen Almond

Principal Knowledge Lawyer, Employment & Immigration
Manchester, UK

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