Apprenticeship funding: the Apprenticeship Levy

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 Apprenticeship Levy is coming into force 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 It is charged at 0.5% of an employer’s annual pay bill. Employers can use HMRC’s Basic PAYE Tools to help they work out how much they need to pay.

Employers who aren’t connected to another company or charity will have an Apprenticeship Levy allowance of £15,000 each year. You can’t carry over any unused allowance into the next tax year.

Connected companies or charities will only have one £15,000 allowance to share between them.

For the first month of the tax year, Apprenticeship Levy-paying employers should divide their Apprenticeship Levy allowance by 12, then subtract this figure from 0.5% of their monthly pay bill.

For each of the following months they should calculate their total pay bill for the year to date, add up the monthly levy allowances for the year to date, then subtract the allowance for the year to date from 0.5% of their total pay bill for the year to date. Subtract the amount of the levy you’ve paid in the year to date.

The levy will not affect the way employers fund training for apprentices who started an apprenticeship programme before 1 May 2017. They will need to carry on funding training for these apprentices under the terms and conditions that were in place at the time the apprenticeship started.

Once employers have declared the Levy to HMRC, they will be able to access funding for apprenticeships through a new apprenticeship service account.

Employers paying the Levy can also use this apprenticeship service to set the price they’ve agreed with their training provider, pay for apprenticeship training and assessment.

They can also tell the government to stop or pause payments (for example, if an apprentice stops their training, takes a break from training or an employer hasn’t received the service they agreed with a provider)

The government will apply a 10% top-up to the funds employers have for spending on apprenticeship training in England. They will apply the top-up monthly at the same time the funds enter an employer’s apprenticeship service account.

That means for every £1 that enters an account to spend in England on apprenticeship training, will turn into £1.10.

Funds will expire 24 months after they enter an employer’s apprenticeship service account unless they spend them on apprenticeship training with a training provider. Whenever a payment is taken the service automatically uses the funds that entered the account first.

This will minimise the amount of expired funds– the apprenticeship service account will let employers know in good time when any funds are due to expire so that they can arrange to spend them if they wish.

Once an employers decide to buy apprenticeship training through the apprenticeship service, the funds will be taken from their account each month to pay the training provider and the assessment organisation.

The government has set up a dedicated team to deal with queries regarding the Apprenticeship Levy. Contact them on: apprenticeships.levy@bis.gsi.gov.uk.