Apprenticeship Levy Update
Further details and updates regarding the Apprenticeship Levy and its implementation are due to be released by the end of this month. The details due to be announced should cover the following –
- Provisional funding bands, which will set the maximum amount of funding which is available for each apprentice from 6th April 2017.
- The provisional level of the government’s support towards the cost of apprenticeship training for non levy paying employers from 6th April 2017.
- The provisional level of the extra payment you can receive for hiring a 16 – 18 year old apprentice from 6th April 2017.
- The provisional amount that will be paid for English and maths training, for apprentices who need it, from 6th April 2017. (This information should be of interest to training providers only as it is expected that employers will not have to pay for English and maths up to Level 2 where required.)
- Eligibility rules that will set out who an employer can spend apprenticeship funding on and where.
- More information on who can provide apprenticeship training and how you can set up your organisation to deliver apprenticeship training.
Further updates are due in October and December 2016 ahead of the introduction of the levy in April 2017.
Further guidance and information is available at -apprenticeship levy how it will work
Some of the main points from the government’s document above are –
- From the financial year 6th April 2017 all employers whatever their size will need to make a financial contribution to the training of an apprentice of any age (this will be through the levy system for employers with pay bills over £3,000,000). The current pilot amounts for apprenticeships and the incentives for employers may be changed from April 2017.
- Although the levy will be collected from all UK employers, the digital apprenticeship service will support the English apprenticeship system only. Scotland, Wales and Northern Ireland will have their own arrangements for supporting employers to access apprenticeships.
- All employers, in any sector – public, private or third, with a pay bill of more than £3,000,000 pounds each year, who are “secondary contributors” with a liability to pay Class 1 secondary National Insurance contributions (NICs) for their employees will need to pay the levy. There are no exemptions.
- Employers will calculate, report and pay their levy to HMRC, through the PAYE process alongside tax and National Insurance. If an employer has calculated that they will need to pay the apprenticeship levy, they will need to declare their liability to HMRC each month. Further details about this will be provided later in the year. Payments will be made on a monthly basis. To be quite clear an employer will pay the 0.5% levy charge each month when their pay bill for that month is over £250,000 (£12 x £250,000 = £3,000,000) and will have an allowance per month of £1,250 (12 x £1,250 = £15,000) to offset against it (follow the link (given above) to the government’s document for the full explanation of the levy, allowance and how any unused allowance in a month will be treated). The levy is not calculated on whether your annual pay bill is usually over £3,000,000 nor will you start paying the levy once your pay bill goes over the £3,000,000 it is calculated per month starting at the beginning of the financial year 6th April 2017. The word “allowance” (referring to the £15,000 allowance offset against levy payments) is a financial term and should not be confused as a monetary payment – you do not receive this “allowance” as a payment of money. It is expected that employers whose pay bill fluctuates over the year – for example with seasonal workers – may find they will pay the levy some months and not others. Adjustments for over payments will be made through the PAYE process - further explanation is given by following the link above to the government’s document.
- Initially only individual levy paying employers will be able to access their funds through the digital apprenticeship service. These employers should have the opportunity to familiarise themselves with the system before the launch of the levy on 6th April 2017 as registration for the digital apprenticeship service should be open by the end of 2016. If you are eligible to pay the levy you should be able to see your first payment in your account at the end of May 2017. You can only use funds in your digital account to pay for training for apprentices and their end point assessment in England (Scotland, Wales and Northern Ireland will have their own arrangements) you cannot use it to pay for any other training outside of apprenticeships and it can only be used to pay towards new apprenticeships not existing ones.
- The government’s document pledges a “top up” of 10% to levy paying companies for spending on apprenticeships. The top up will be applied when funds enter the company’s digital account.
- The digital accounts will be rolled out over a period of time, hopefully to be fully in place by 2020. They will be available to begin with for those employers who will pay the levy. From 6th April 2017 all non levy paying employers (until able to access their own digital account) will pay for apprenticeships by negotiating the price with a training provider up to the funding cap allocated to the apprenticeship standard. You will then pay your contribution of the co-investment, spread out across the length of the apprenticeship, direct to the training provider. The government will pay their share of the co-investment (inline with the employer’s contribution) directly to the provider after proof of payment that the employer has paid their share to the training provider, as agreed.
- For levy payers if their digital account has insufficient funds to fully fund apprenticeships they will be able to pay additional monies in to their digital accounts, on the same co-investment basis as non levy payers at the rate, to be confirmed, to be introduced from April 2017.
- Funding in your digital account will expire after 18 months if you do not spend it on apprenticeships. Quite simply “use it or lose it”. As you spend your account the money will always be taken chronologically – on an oldest payment first basis.
It is important to remember –
Alongside the development of the levy there are changes to apprenticeships. New apprenticeship “standards” have been developed by trailblazers – employer led groups. These will replace the current apprenticeship frameworks (see earlier blogs for further information.) The apprenticeship standards approved for delivery can be seen on the government’s website – apprenticeship standards ready for delivery. This spreadsheet lists the applicable funding caps and by clicking on any apprenticeship title you will be able to access two documents - the Standard - requirements, duration and level and the Assessment Plan. This document is continually being updated as standards are approved and published so it is important to keep referring back to it.
As new standards are approved and published the frameworks will be switched off (please see earlier blog as to frameworks that have already ended or are ending 1st December 2016), however, the government has said that any apprenticeship that has already started will continue as it commenced. It will not transfer to a new standard nor should it be funded at any different rate.
As well as changes to the apprenticeships and the way they are financed the government are also looking to overhaul the current system of who is eligible to be listed on the Register of Training Organisations to deliver apprenticeships. This may have a major impact on training organisations and a consultation process is due to begin shortly to decide what criteria and standards training organisations should meet and achieve to be eligible to be included on the new register to deliver apprenticeships. All employers will be able to access this new register when it is published.
Due to representation from various bodies the government will consider amending this year’s Finance Bill 2016 to take in to consideration employers within “connected” companies to enable them to apportion payment across all the connected companies. The government will also look at the possibility of large employers, eligible to pay the levy, using their digital account in the future, to finance apprenticeships for employers in their supply chain who do not pay the levy. These issues are unlikely, however, to be fully addressed for the start of the levy in April 2017.
Sue Yates 16th June 2016