It’s that time of year again when all talk turns to the legal and regulatory changes that will come into force at the beginning of a new tax year – which started this year on the 6th April. With the National Living Wage set to rise once more, and new rules on gender pay gap reporting coming into play, there’s certainly plenty to talk about, and that’s before you consider one of the biggest changes: the new Apprenticeship Levy.
Unfortunately, a new poll by City & Guilds has found that 33% of businesses eligible to pay the levy are not aware it even exists. Even more concerning is the fact that almost a quarter of heads of apprenticeships within these businesses aren’t aware of the new system.
In light of this, our experts at the Love Success PA recruitment agency have decided to shed some light on the Apprenticeship Levy – what it is, when it will be implemented, and how it will affect businesses and employees alike.
What is the Apprenticeship Levy?
The Apprenticeship Levy is a new payment that will be collected from large employers via PAYE returns. It’s being implemented in order to encourage employers, both in the public and private sectors, to invest further in apprenticeship schemes. The money raised by the levy will be available by those same businesses to provide funding for these schemes.
Who is affected?
All businesses with an annual wage bill of more than £3m will be required to pay the levy, which starts at 0.5%. For a business with a wage bill of exactly £3m per year, the levy would result in them paying £15,000 per year to HMRC. However, the government has also offered an allowance of £15,000 to offset against the amount owed (which means the larger businesses eligible to pay the levy will naturally pay more than smaller businesses).
When does the Apprenticeship Levy come into action?
Eligible businesses must pay the levy from April 2017 onwards. It will be collected on a monthly basis, just like most tax and NIC payments.
What happens next?
The money will be deposited into a digital apprenticeship service account – and each business will have its own. As levy payments go out, businesses will start to see available funds in their digital accounts. The government will also contribute a top-up amount of 10% - so a business paying in £1,500 per month into their digital account would receive an additional £150 from the government.
All of the money in the account is designated for the funding of apprenticeship schemes, encouraging firms to take on and train younger workers. The funds (including top-ups) have an expiration date of 18 months, providing extra incentive for businesses to start investing in training, and fast.
What about small businesses?
Small businesses won’t have to pay the levy, but they will have access to the digital apprenticeship service, which helps them choose training providers, assessment organisations, and post vacancies for apprenticeships within their company. The plan is for the system to become a central platform for sourcing and funding apprenticeships by 2020.
Any funds that have gone unused by larger businesses (at the end of their 18-month expiry date, for example) will eventually become available for SMEs to tap into.
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