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Apprenticeship Levy
Guidance Presentation
Laura Pickering
MTA Learning & Development Co-ordinator
Version 1 – July 2016
This presentation
The MTA has created this presentation to provide guidance on the
Apprenticeship Levy
Please ensure you read this presentation through from start to finish – a
lot of questions that you might have based on the first couple of slides will
mostly be answered later in the presentation
What, When and Why?
The Apprenticeship Levy will be a 0.5% tax on employers with an annual
pay bill of £3m or more, to fund new apprenticeships
The pay bill includes ALL employed staff across the UK
There will be a £15,000 allowance to offset the Levy – please see next
slide
The Levy will be implemented from 6 April 2017
The Levy is part of a broader programme of reforms
The Levy will impact quite a few MTA members, therefore we have
created this guidance presentation for you to raise awareness within your
organisation and to help with budget planning for the next tax year
Will I have to pay the Levy?
Example 1: an employer who would pay the Levy
An employer with an annual pay bill of £5,000,000:
Levy sum: 0.5% x £5,000,000 = £25,000
Subtracting Levy allowance: £25,000 - £15,000 = £10,000 annual levy
payment
Example 2: an employer who would not have to pay the Levy
An employer with an annual pay bill of £2,000,000:
Levy sum: 0.5% x £2,000,000 = £10,000
Subtracting Levy allowance: £10,000 - £15,000 = £0 annual levy payment
Visit http://levy-calculator.icon-training.com/ for your own Levy estimate
What if I am a connected company?
Where a group of employers are connected they will only be able to use
one £15,000 allowance. The definition of connected companies and
charities is the same as the definition used with the Employment
Allowance.
The government intends to introduce an amendment to the Finance Bill
2016 concerning the allocation of the levy allowance. The amendment will
mean that if you are part of a group of connected employers, you must
decide what proportion of the levy allowance each employer in the group
will be entitled to. This decision must be taken at the beginning of the tax
year and will be fixed for that tax year. Each employer will then calculate
what they have to pay through the same processes set out above, but
using their portion of the £15,000 allowance.
What if I am a connected company?
Directing levy funds to other employers
In the first year of the levy, you will be able to use the funds in your levy
account to pay for apprenticeship training and assessment for your own
employees.
Some employers might wish to direct their funding to other employers.
This issue is still under review.
Pooling funds in a levy account with other employers
If you are in a group of companies connected for the purposes of paying
the levy, your group will be able to collect their funds together into one
account.
Employers that are not connected will not be able to pool funds in a levy
account using the digital service. However, you will be free to co-ordinate
your spending at local or sector level outside of the digital service.
How will I pay the Levy?
You will calculate, report and pay your levy to HMRC, through the Pay as
You Earn (PAYE) process alongside tax and National Insurance
Contributions (NICs)
Online tools for employers will be available via the digital apprenticeship
service over the next year. You will be able to register to create your
account from January 2017 and you’ll be able to familiarise yourself with
the service
Levy-paying employers will be able to use the service to pay for the
training and assessment of apprentices from April 2017
When you’ve registered, you’ll need to verify your Pay as You Earn
(PAYE) schemes and link them to your account. You will be able to use
more than one account if you’d like to keep your schemes separate.
How can I benefit from the Levy?
Employers who pay the levy and are committed to apprenticeships
training will be able to get out more than they pay in to the levy.
The government will apply a 10% top-up to monthly funds entering levy
paying employers’ digital accounts, for apprenticeship training in England,
from April 2017.
Levy-paying employers will be able to use the service to pay for the
training and assessment of apprentices from April 2017
Example:
Employer has £12,000 annually entering their levy account
Monthly account funding = £1,000
Top up: 10% x £1,000 = £100
Levy monthly account increase: £1,000 + £100 = £1,100
£13,200 annually to spend on Apprenticeships
Contributions outside of the Levy
There are two types of employers who will be required to contribute outside
the levy towards the cost of their apprenticeships training:
1. Employers who haven’t paid into the levy.
2. Employers who have used all funds in their digital apprenticeship account.
These employers will be required to co-invest a small proportion of funding
towards the cost of their apprenticeships training. These “costs” are as yet
unknown.
How will the Levy work?
Image source: BDO
What about staff outside England?
Companies that are eligible to pay for the levy will be taxed on 100% of
their staff, regardless of where they live or work in the UK
However, companies will only receive funding back for apprentices that
live in England, irrespective of where they work.
For example, if 20% of your staff live in Wales, Scotland or Northern
Ireland you will only receive 80% of the potential £15,000 funding into
your digital account.
Wales, Scotland and Norther Ireland will be given their remaining % of the
funding from the Government for employees based in those countries, it is
up to those countries how the money is spent
Do check the HMRC has the correct information regarding your
employee’s locations.
Accessing Levy funding
Once you have paid the levy to HM Revenue and Customs (HMRC) you
will be able to access funding for apprenticeships through a new digital
apprenticeship service account.
You will be able to use this to pay for training and assessment for
apprentices in England. The service will also help you find training
providers to help you develop and deliver your apprenticeship
programme.
Separate arrangements will be in place in Scotland, Wales and Northern
Ireland.
What can I use my Levy funds for?
Funds can be used for:
apprenticeship training and assessment (with an approved training
provider and assessment organisation up to its funding band maximum).
Funds cannot be used for:
wages
statutory licences to practise
travel and subsidiary costs
managerial costs
traineeships
work placement programmes
the costs of setting up an apprenticeship programme
Can I use the funds for existing employees?
Yes, so long as the training meets an approved Apprenticeship standard
or framework and the proposed candidate meets the eligibility criteria for
apprentices.
However exiting apprentices can continue on their current programme.
Only apprentices employed after 6 April 2017 will be affected by the new
Levy legislation
Approved training providers
To deliver training the employer would need to register as an approved
provider and be subject to Skills Funding Agency (SFA) quality
arrangements and Ofsted inspection.
You can use different training providers. Our advice would be find one
training provider that can manage your apprenticeship programmes
including multiple suppliers.
The Government currently has this list of approved providers. Please
check that your training provider is planning to register for this
http://findatrainingorganisation.nas.apprenticeships.org.uk/
To register as an Apprentice Training Agency visit
https://www.gov.uk/government/publications/become-a-recognised-
apprenticeship-training-agency
Training providers must comply with the SFA funding rules
https://www.gov.uk/guidance/sfa-funding-rules
Funding limits
Employers will not be able to spend an unlimited amount of money on a
single apprentice.
Funding bands will be set which limit the amount of levy funds an
employer can spend on training for an individual apprentice.
The band will vary according to the level and type of apprenticeship (for
example, more expensive, higher quality training is likely to be in a band
with a higher limit).
Setting limits to the amount of government or levy funding that can be
used for apprenticeships will enable employers to increase the quantity of
apprenticeships they can purchase with their funding, whilst ensuring that
quality training does not become too expensive for employers to
purchase.
The Government has yet to announce the funding bands
Funding limits
Image source: BDO
Additional Funding
Funding 16-18 year olds: Payment to help meet the additional costs
associated with employing young apprentices will be paid to you via the
training provider.
Funding for disadvantaged individuals: You will receive the same payment
(as for a 16-18 year old apprentice) if you recruit young people who are
aged 19-24 who have an Education and Healthcare Plan provided by the
local authority or if you employ a 19-24 year old that has been in the care
of the Local Authority.
Funding for additional learning support: If your apprentice needs extra
support to help meet additional learning needs, payments can be made
direct to the training provider to pay for these.
Funding for English and Maths training: If your apprentice doesn’t already
have the required minimum standard in English and Maths they may need
to undertake an English and/or Maths course. Funding might be available
for this.
Will BREXIT impact the levy?
It was announced at the beginning of July that there would be a "little
delay" in providing further funding information following the British public's
decision to leave the European Union , but said "we should all continue to
assume and work on the assumption that the apprenticeship levy is
coming in, as planned”.
Mark Dawe, Chief Executive of the Association of Employment and
Learning Providers (AELP), was among those who argued it was now
more important than ever to press ahead with apprenticeship plans. "If
anything, the referendum result means that a skilled British workforce will
be needed more than ever, so the target of three million apprenticeship
starts by 2020 takes on a new significance."
What about MTA Apprenticeship Grants?
The MTA offers training grants of up to £500, apprenticeship grants of
£2,000 and interest-free apprenticeship loans of £10,000
Regardless of whether you have to pay the Levy or not, you will still be
eligible to apply for this funding as long as:
You have been an MTA member for at least one year
Your annual turnover is less that £10m
If you are interested in applying for any of the above, please contact
[email protected] for more information
Levy: The MTA’s views
In theory the Levy could be a good move for the manufacturing industry,
provided it is easy to administer
Employers pay 0% National Insurance Contributions for apprentices
under 25 years of age
There are subsidies for non-levy paying businesses in the form of co-
investment
There is the potential to re-categorise some employees as apprentices
You could become an approved apprentice training provider (see slide 15)
We expect the list of approved training providers to grow considerably
before the Levy is implemented
Levy: The MTA’s concerns
The MTA has serious concerns regarding the amount of time left to
provide clarity to businesses so that they are able to set their budgets for
the next tax year.
Final information will not be made available until December 2016. There
have been calls to postpone the implementation of the Apprenticeship
Levy to 2018 however the Government has confirmed it will not be
delaying the start.
At 0.5%, the Levy has been set at too high a level
The administration of the Levy is bureaucratic
The speed at which the Levy will be implemented is too fast
There is a lack of clarity in communication of detail
There is a lack of clarity regarding the implementation of the digital portal.
What next?
The Government was due to release additional funding information in
June 2016: https://www.gov.uk/government/publications/apprenticeship-
levy-how-it-will-work/apprenticeship-levy-how-it-will-work#when-further-
information-will-be-available
Further guidance is expected from BIS as follows:
June (now delayed due to BREXIT): provisional funding and eligibility
rules, information on how to become an approved trainer
October: full draft funding and eligibility rules
December: final detailed funding and eligibility rules
The MTA will revise this presentation after new guidance is issued
More information
In the first instance please visit www.gov.uk and search for Apprenticeship
Levy pages – these should be updated soon
The MTA would like to thank BIS and BDO, whose informative breakfast
sessions aided the content of this presentation
Useful sites
https://www.gov.uk/government/publications/apprenticeship-levy-how-it-
will-work/apprenticeship-levy-how-it-will-work
https://www.gov.uk/government/publications/apprenticeship-levy-how-it-
will-work/apprenticeship-levy-how-it-will-work#when-further-information-
will-be-available
https://www.gov.uk/government/organisations/skills-funding-agency/about
http://feweek.co.uk/wp-content/uploads/2015/08/Apprenticeship-levy-
briefing-paper-FINAL-2.pdf
https://www.gov.uk/government/collections/apprenticeship-grant-for-
employers-of-16-to-24-year-olds