In Spring 2017 the way the Government funds apprenticeships in England is changing. Some employers will be required to contribute to a new apprenticeship levy, and there will be changes to the funding for apprenticeship training for all employers.
The Government is introducing the apprenticeship levy on 6 April 2017. The levy requires all employers operating in the UK, with a pay bill over £3 million each year, to invest in apprenticeships.
Employers with an annual pay bill of more than £3 million will need to spend 0.5% of their total pay bill on the apprenticeship levy.
The levy is effectively a tax which provides a fund for employers to pay for apprenticeships.
Given that the threshold is a £3m per annum pay bill, in reality only about 2% of employers will be liable to pay it.
However, the Government is introducing a 'levy allowance' of £15,000 per year. This means that the total amount firms need to spend is 0.5% of your pay bill, minus £15,000.
Firms will report and pay the levy to HMRC through the PAYE process.
If an employer has an annual pay bill of more than £3 million, it will start paying the levy in May 2017.
Each month, employers will have to:
- let HMRC know whether they need to pay the apprenticeship levy
- include the levy they need to pay in their usual PAYE payment to HMRC - they should do this by 19 (or 22 if they report electronically) of the following month
Any apprenticeship levy payment to HMRC will be allowable for corporation tax.
The impact on employers needs to be considered and those to whom it applies must be prepared. It will of course increase the monthly payments bill and in the cost to the organisation of administering it. It is clear from the Government guidance that there will be an additional burden on employers in their form of extra, detailed administration.
Employers are well advised to consider the impact of the introduction of the levy well in advance of its introduction.
Link to Government guidance: https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work/apprenticeship-levy-how-it-will-work
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