The Apprenticeship Levy was announced at Summer Budget 2015, and at Autumn Statement 2015 it was announced that it would come into effect from 6 April 2017.
In our previous blog on this subject from February 2016, http://blog.aab.co.uk/just-another-tax/, we explained how the levy will be payable by all employers, including charities, in all sectors, across the whole of the UK – regardless of whether they actually employ any apprentices.
The levy will be charged at a rate of 0.5% of an employer’s pay bill and employers will receive an annual allowance of £15,000 to offset against their levy payment and this means that employers not subject to the rules around connection will only pay the levy if their pay bill exceeds £3 million in a given year.
This initial package of draft Apprenticeship Levy regulations have been drawn up under the powers that are contained in the Finance Act 2016, specifically relating to calculation, payment and reporting of the Apprenticeship Levy including the operation of the £15,000 annual levy allowance.
They also make it clear that only where an employer has a levy liability, or expects to have a levy liability during the tax year, they will need to engage with reporting the Apprenticeship Levy to HM Revenue and Customs (HMRC). These are the areas in which the operation of the levy has received the most stakeholder interest.
Employers with a pay bill of £2.8 million or less for the previous tax year or who believe their pay bill will be less than £3 million in the current year (unless they find otherwise) will not have to engage with the Apprenticeship Levy.
The £2.8 million pay bill test is to ensure that only employers who may find their pay bill increasing to over £3 million during the year will have to engage with reporting the levy, as it is unlikely that an employer with a pay bill of less than that will find themselves over the £3 million threshold in the following tax year and therefore begin to accrue levy liability.
These draft regulations specify how the levy will be reported through the Pay as You Earn (PAYE) process, along with Income Tax and National Insurance contributions. The regulations confirm that the annual levy allowance will operate on a monthly cumulative basis, so the levy allowance will increase evenly throughout the year.
The government intends to make the full package of draft Apprenticeship Levy regulations available later this year which will cover other aspects such as assessment, repayment, recovery from third parties, records to be retained etc.
With the government anticipating that 2% of employers will be liable to the levy and estimating £3 billion a year being raised, £500 million will be allocated to the devolved parliaments in Scotland, Wales and Northern Ireland.
Crucially however, there is still no detail on how the levy will actually work for employers in Scotland and how they will be able to access the funds. The Scottish Government consultation on the best use of the apprenticeship levy closed on 26 August 2016. It gathered views from businesses, industry and stakeholders and we eagerly await the results of that and the proposals put forward on how employers can get something back for their liability.
If you have any concerns on how the apprenticeship levy may affect your business please contact Charlotte Stewart, Integrated Employment Solutions Manager, firstname.lastname@example.org for more information.