Apprenticeship levy – The facts

EEFIn spring 2017 the way the government funds apprenticeships in England is changing. You may be required to contribute to a new apprenticeship levy, and there will be changes to the funding for apprenticeship training for all employers.

The levy will put control of apprenticeship funding in your hands and will encourage you to invest in apprenticeship training and is being launched in April 2017.

Will I pay the levy, and if so how much will the Levy be?

The levy will apply to both public and private employers across all sectors and will be paid by all UK employers.

The Levy will be set at a rate of 0.5% of your total payroll and will be collected monthly via PAYE. The pay bill will be based on total employee’s earnings subject to Class 1 secondary NICS.

There will be a £15,000 fixed annual allowance for you to offset against Levy payments.

This means that any company with an annual pay bill of over £3million will be in scope of the levy.

But be careful not to get caught out if you are a ‘connected’ company e.g. part of a group as you only get ONE allowance, and therefore even if your pay bill is under £3million you may find yourself in scope.

What happens to companies who do not need to pay the Levy?

If you do not fall in scope of the levy you will continue to have some government funding for apprenticeship training. You will be required to pay in 10% of the apprenticeship training and assessment costs and government will top up the remaining 90%.

How much funding will Apprenticeships receive?

All approved apprenticeship standards will be allocated a funding cap which will indicate how much levy funding can be used for each apprenticeship. The cap will depend upon the framework or standard that is being trained against. It will cover costs of training including assessment.

How can I spend my Levy vouchers?

After paying your levy funds to HMRC, these will then be transferred into your new ‘Digital Apprenticeship Service’ account. You can then use the funds in your account to pay for apprenticeship training.  How much you can spend on each apprenticeship will depend on what cap that apprenticeship is in.

Can I use my Levy to train my existing employees?

The Levy can be used to train existing employees as long as the training meets an approved apprenticeship standard or framework and the proposed employee meets the eligibility criteria for apprentices.

Will I get back all the money I pay into the levy?

The levy applies to your UK wide pay bill. However you only get back in vouchers the “English fraction” of your pay bill. This is defined as the proportion of your pay bill that equates to employees with an English home postcode. Therefore companies that operate across the devolved nations will not get back all their levy money.

The government however apply a 10% top-up to monthly funds entering your digital account, for apprenticeship training in England, from April 2017. All funds entering your account will be increased, so every £1 will be increased to £1.10 in value.

What happens if I don’t spend my Levy funds?

The digital vouchers you will have to spend on apprenticeship training in your new account will expire after 24 months. Therefore if you do not use your vouchers within this time frame you will lose them.

What happens if I run out of digital vouchers in my account?

If you use up all the digital vouchers in your account and want to train more apprentices then you will be moved into the co-investment funding model where you will have to pay 10% of the training costs and government pay the remaining 90%.

What should I do now?

If you already engage with apprenticeships then you will need to start to plan out the amount of levy liability you have and how this fits against the budget you have already allocated to training.

If you don’t currently take on apprentices or complete any type of apprenticeship training and you are effected by the levy, then you will need to start to plan out how to spend your digital vouchers.

But don’t panic  we are here to help you through all of the specifics on the levy and how to plan, ensuring you get the most out of the vouchers that you will start to receive from May 2017.

There are ways to utilise the levy to upskill / reskill your existing workforce and not just specifically looking at taking on new apprentices, which we can help you identify.

There are plenty of ways we can work with you to ensure that you maximise your Levy contributions, from helping you through the planning stage to a complete Levy managed service.

So get in touch today to see how we can help you. Email; or call 0845 293 9850

Visit EEF’s Website for more information.


About EEF

EEF is the voice of UK manufacturing and engineering and a leading provider of business support to industry in general.
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