From April 2017, the ‘Apprenticeship Levy’ comes into effect – a new type of tax that’s being introduced to support the investment in future apprenticeships in the UK.
The Apprenticeship levy aims to help fund three million new apprenticeships in the United Kingdom by 2020, with the Government aiming to raise a total of £3 billion per year from the initiative.
Under the scheme, companies will be able to pay for apprenticeships using ‘vouchers’ from the funds raised.
The apprenticeship levy is inclusive of both public and private sector businesses, as well as charities and educational providers.
Not all businesses have to pay the levy – it’s geared to ensure that the biggest UK companies pay the most, with the smallest not paying at all.
Whether your business has to pay or not is related to your annual employee wage bill.
The amount paid is 0.5 per cent of a company’s annual payroll – less a £15,000 allowance.
This is good news for small businesses, as the allowance means that, in practical terms, any UK employer that pays less than £3 million per year on payroll doesn’t actually pay towards the levy at all.
All businesses that exceed the £3 million per year figure will find themselves paying a monthly amount towards it.
This includes all payments subject to employer Class 1 secondary National Insurance Contributions, and covers wages and any bonus payments – but not employer contributions to pensions.
For example – if a company has a payroll bill of £5 million, they will pay a 0.5% levy (£25,000), minus the £15,000 allowance, for a total paid levy of £10,000 over the year.
The Apprenticeship levy is collected monthly based on the previous month’s earnings. The first eligible month is April 2017, meaning the first payment will be in May 2017 through Pay as you Earn (PAYE).
Non-payment penalties, time limits, and appeals procedures are the same as for income tax payment.
If there’s common ownership or control through multiple employers, then just one allowance of £15,000 is allowed.
The allowance can be split between the connected companies, but this division must be stated at the start of the tax year and remain in place until the end of the tax year.
Once you have declared the levy to HMRC, you will be able to access funding for apprenticeships through a new digital apprenticeship service (DAS) account.
Please note – this digital service is only available for companies in England. Details are yet to be confirmed regarding how to access from Scotland, Wales, and Northern Ireland.
The DAS will allow companies to choose and pay training providers that have been approved by the Government, as well as post their own apprenticeship opportunities and find candidates.
To start with, this digital platform will only be available to companies that pay the levy.
For companies that don’t pay towards the levy, it’s planned that by 2020 all employers will have access to the DAS.
Payroll is a complicated part of a business as it is…even more so with this new addition!
If you’re interested in outsourcing your payroll to a professional service with friendly and personal touch, PayAssist can help.