The Government has published draft legislation on the introduction of the apprenticeship levy.
The draft confirms that from April 2017, employers with a wage bill of more than £3 million will have to pay a 0.5% levy to fund apprenticeships.
Apprenticeship levy resources
The Government announced its proposals in last year’s Autumn Statement with the hope it will help create three million more apprenticeships during the rest of this parliament.
The legislation will be introduced in Finance Bill 2016, and the apprenticeship levy will be payable through Pay As You Earn (PAYE), alongside income tax and National Insurance.
The calculation of the tax will be based on the same total employee earnings figure as the one that is used for class 1 national insurance contributions.
Employers will receive a £15,000 allowance to offset the payment of the levy, which will be paid in vouchers.
There will also be a connected persons’ rule, similar to the employment allowance connected persons rule, so employers who operate multiple payrolls will only be able to claim one allowance.
The Government estimates that the apprenticeship levy will be paid by less than 2% of UK employers. In its policy paper introducing the draft legislation, it said: “For employers paying the levy, the measure is expected to have some impact on administration costs and the impact will vary by employer, depending on the size of their paybill.”
It added that there is likely to be a “near-term impact in reducing earnings growth”, but that increased productivity brought about by apprenticeship training will ultimately lead to increased profitability for businesses, and increased wages in the long term.
It’s hoped the levy will raise around £3 billion for the Exchequer to spend on boosting the quantity and quality of apprenticeships.
Last month, CBI director-general Carolyn Fairbairn wrote to business secretary Sajid Javid to warn that the apprenticeship levy could impose huge costs on employers without any improvement in the training they provide.
She said: “For over a decade, businesses have been promised more influence over the qualifications on offer in the in-work education system — but programmes have changed too regularly, and government-inspired red tape has made the system difficult to deal with.”
The lobbying group has called for an “allowable expense” system so that companies can claw back some of the costs involved in running apprenticeships.
The Government has said it will set up an Institute for Apprenticeships to set standards and ensure quality, although some critics worry that the allowance will be used to “rebadge” current workplace training as apprenticeships in order to recoup costs.