New apprenticeship levy applies from April 2017

This week (6 to 10 March 2017) marks the 10th National Apprenticeship Week. This is quite timely, as it precedes the introduction of the apprenticeship levy next month.

The apprenticeship levy applies from 6 April 2017, and effectively shifts the cost of funding apprenticeships from the government to large employers.  The levy will be collected through the PAYE system alongside tax and National Insurance Contributions.

The rate of the levy will be 0.5% of each employer’s wage bill; effectively operating as an additional tax on employers. However, each employer will be able to offset an allowance of up to £15,000 against the levy, which in effect means that the levy only becomes payable on wage bills of over £3m (as 0.5% of £3m equals £15,000), unless the employer is “connected”.  A company is deemed to be “connected” to another if it has control of that other company, or if both companies are under the control of the same person or persons.  Therefore, generally speaking, companies in a corporate group will be connected.  Importantly, connected companies will only be entitled to one £15,000 allowance between them for each tax year.

Employers will have access to a new Digital Apprenticeship Service (DAS) account, which they can use to access funding for apprenticeships. The amount of funds available in an employer’s DAS account will be determined by the value of their apprenticeship levy and the number of their employees living in England.  The government will also apply a 10% ‘top up’ to the funds.  Funds will expire 24 months after they enter an employer’s DAS account.

More details on the levy and how it will operate are set out in the guidance manual recently published by HMRC. For advice on the apprenticeship levy, or on apprenticeships generally, contact your usual DLA contact.