Introduction of Apprenticeship Levy

February 10, 2017, By

From 6th April 2017 larger businesses will be affected by the introduction of an apprenticeship levy. The apprenticeship levy was originally announced by the Chancellor George Osborne in the November 2015 Budget with the aim of seeing more than 3 million apprentices in the workplace by 2020.

The levy requires all employers operating in the UK, with a pay bill over £3 million each year, to invest in apprenticeships. The pay bill is be calculated based on total employee earnings. It does not include payments such as benefits in kind but will apply to total employee earnings in respect of all employees.

The government states that the Levy will help to deliver new apprenticeships and will support quality training by putting employers at the centre of the system and employers who are committed to training will be able to get back more than they put in by training sufficient numbers of apprentices.

The levy is introduced by sections 98-121 of the Finance Act 2016 and will be payable by employers across all sectors through PAYE, alongside income tax and National Insurance contributions (secondary Class 1 NICs). The rate of the levy will be 0.5% of the pay bill for a tax year. Employers will receive an allowance of £15,000 to offset against payment of the levy. According to the government, less than 2% of employers will be liable to pay it.

The levy allowance is spread evenly over the year, so that the amount that may be offset against each monthly levy liability is 1/12 of the allowance for the year to which the employer is entitled. Any unused allowance is carried forward for off-setting in subsequent months.

Each month, responsibility for calculating and paying the levy remains with the employer. The new Part 7A of the PAYE regulations will set out the method of calculation, the information that an employer must supply to HMRC and the mechanism for payment as part of the monthly PAYE liability.

Should you or your business require any further guidance on complying with the levy then please do not hesitate to contact Slater Heelis on 0161 672 1246.