Government issues guidance on Apprenticeship Levy

Earlier this year, the Government published draft legislation that will introduce the proposed new apprenticeship levy from 6 April 2017. They have now issued guidance which is available here.

The levy will be payable by employers who are liable for paying employers’ national insurance contributions (NICs) and will be 0.5% of the employer’s NIC tax bill for the tax year in question less an annual allowance of £15,000. Practically, this means that the levy will only be paid by employers who have a pay bill of £3 million or over.

As the draft legislation stands, if companies or charities are connected then only one of them will be entitled to the allowance. However, the government have now made an amendment to the previously published legislation that will allow ‘connected’ companies to share the allowance between them. Broadly, group companies are likely to be ‘connected’ companies, the definition will be the same as for Employment Allowance, the detailed technical guidance is available here. The government have also stated that the levy will be payable monthly with one twelfth of the allowance (£1,250) being available monthly with provision for any unused balance to be carried forward.

The stated aim of the new legislation is to enable funding for new apprenticeships and the government claims that employers who train apprentices will receive more from the scheme than they pay in. However, employer’s organisations have not reacted well to the new proposals and earlier this year FT.com reported that the CBI had written to Sajid Javid warning him that the proposals needed to be reformed the letter states “For over a decade, businesses have been promised more influence over the qualifications on offer in the in-work education system — but programmes have changed too regularly, and government-inspired red tape has made the system difficult to deal with”.

Although the draft legislation has now been published there is still a great deal of detail that will have to be finalised before the levy can become operational. HMRC will be given the power to issue secondary legislation to deal with detailed matters in areas such as; collection and recovery of the levy, rules on inspection and penalties for non-compliance.

Employers in England will be able to reclaim the levy as “digital vouchers” which can be used to pay for apprentice training. However, we understand that there are, at least at present, no comparable schemes in Wales, Scotland or Northern Ireland where decision making on repayment of the levy will be devolved to regional government.

12 May 2016

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