From 6 April 2017, businesses will have to report to HMRC for calculation of a new compulsory levy to fund apprenticeships across the UK. The levy will be used to build a central ‘pot’ of money which will be topped up by the Government to help fund both existing apprenticeship schemes and the Government’s pledge of 3 million new apprenticeships in England by 2020. This is part of a wider objective to encourage people to enter the workplace without degrees.
The starting point of the levy is that all employers will owe a sum equivalent to 0.5% of their total wage bill. They will, however, receive an offset allowance of £15,000, meaning that only employers with an annual wage bill in excess of £3 million will have to pay money to HMRC under the levy. This £15,000 allowance can be lost as a penalty if a business fails to submit levy calculations through PAYE, even if the business is below the £3 million threshold and would not otherwise have had to pay.
The way businesses access apprenticeship funding is also changing. In England, a Digital Apprenticeship Service (DAS) will be set up from October 2016, and UK employers with employees in England, who exceed the £3 million threshold and pay the levy, will be able to access funding through their own personal accounts. Employers below the £3 million threshold who do not pay the levy will not have access to levy funds, but will have access to the DAS, through which they can make contributions to the cost of apprenticeships and access Government funding.
The exact mechanism for reporting under PAYE, the way funding will be accessed in Scotland, Wales and Northern Ireland, and other details are yet to be finalised. Further guidance was expected to be issued in June 2016, but has been delayed by the fallout from Brexit. As this is a domestic measure, however, it is not thought that Brexit will impact on the date when the levy comes into force or its implementation.
The levy will affect all businesses so the time to start preparing for DAS and levy reporting will soon be upon us.