The government is changing the way it funds apprenticeships, and on the 6th April 2017, the new changes will take effect. If your business has an annual pay bill of more than £3 million, you will be required to pay a monthly, compulsory, deposit into the government’s apprenticeship training fund each month calculated as 0.5% of your total pay bill. HMRC’s Basic PAYE Tools can help calculate what you will owe to the apprenticeship levy and it’s important, if you’re a large organisation – that you don’t simply view this as yet another tax bill to pay. You can claim this money back and put it to good use.
How to claim back your apprenticeship levy
The first point to note is that the government will be introducing an apprenticeship levy allowance of £15,000 per year, so you can subtract this amount from the 0.5% of your total PAYE bill that you are due to pay. This means, only companies who have a PAYE bill of over £3 million each year will have to pay any levy at all. If you don’t use your £15,000 allowance however, you cannot roll it over to the following tax year. The government is also offering a 10% bonus top up on funds. This means that for every £1000 paid into the fund, employers will actually have £1100 to spend on apprenticeship training. This is in addition to the £15,000 levy allowance. Once you have registered your company and declared the levy with the HMRC, you will be able to access your funding for government-approved apprenticeships through a digital apprenticeship service account.
What can you use the money on?
The £15,000 that you will receive in your apprenticeship service account and any additional levy you have to pay in can be spent on government-approved apprentice training providers. All training providers have to go through rigorous financial and quality tests, so as to ensure standards are kept consistently high. The funds can also be used to pay apprenticeship assessment centres but cannot be used for any other costs associated with the apprenticeship, including but not limited to apprentice wages, subsidiary costs or travel.
Why the apprenticeship levy is a good thing
One assumption about the levy is that the funds can only be used on school-leavers. This is not true at all, and you can, in fact, use the fund to train your existing staff. This means, your current employees can undergo a new internship where they can learn new skills to perhaps pursue a different line of work within your organisation. Alternatively, they can improve the skills they have already obtained and undergo a higher-level apprenticeship and progress up through the ranks. This way, you are getting free training for your staff and your business will benefit from the extra skills.
The UK skills gap is getting worse and worse, and this apprenticeship levy could be the solution. To take full advantage of it, you’ll need to act fast. The later you leave addressing the recovery of your Levy, the more difficult it becomes to recover its full value.
New reforms are encouraging businesses to take on more apprentices, and for apprentices under the age of 25, they will no longer have to pay National Insurance contributions. The apprenticeship levy allows businesses to partner with approved training providers, developing a structured plan that is tailored to their company. This means they will be able to train and develop new talent with skills specific to their business.
How LCoAT can help you
There are still a lot of misconceptions about the new apprenticeship levy and what it means for businesses. We work with large companies to build a “Levy Recovery Blueprint” – a detailed plan showing which apprenticeships would best suit your training needs as well as the monthly levy recovery value of each. To learn more and to have all of your question about the apprenticeship levy answered, contact us today on 020 3651 4747 fill in the contact form on our website and we’ll be in touch.