Apprenticeships: a change in funding from April 2017

In 2015 the government announced plans to introduce an Apprenticeship Levy on employers in an attempt to expand the ‘quantity and quality’ of apprenticeships in the UK.

The levy will be introduced on 6 April 2017, requiring all employers with an annual pay bill of over £3 million to spend 0.5% of their pay bill on the levy to contribute towards the funding of apprenticeship training and assessment in England. Employers will also receive a  £15,000 levy allowance each year which can be deducted from the 0.5% levy.    

e.g.      0.5% x £4,000,000 = £20,000 (levy amount)

£20,000 - £15,000 = £5,000 (payment required)

Levy paying employer?

Employers will be required to report and pay the levy to HMRC monthly through PAYE at the same time as tax and national insurance payments are made. Funding can then be accessed via an ‘apprenticeship service account’. This account will allow employers to select and pay for training and assessment from providers which have been approved by the government, as well as post vacancies. Employers who pay the levy will also receive an extra 10% on top of their monthly contributions to spend on training and assessment e.g. if an employer pays in £1.00, they will receive £1.10 to spend.

Employers liable for the levy will be able to register for the online apprenticeship service in February 2017. In preparation employers should obtain their government gateway login details for PAYE schemes, Companies House or charity number and begin to assess their financial capabilities to pay the levy.

Non-levy paying employer?

Employers who are not liable to pay the levy will not need to use the apprenticeship service account until at least 2018, instead they will continue to receive funding directly from the government. From May 2017 however, this funding can only be used for assessment and training from a provider which has been approved by the government and employers must pay a 10% contribution for the training and assessment directly to the provider (co-investment).   

Note, funding through the apprenticeship service account or through co-investment cannot be used to pay for things such as wages, subsidiary costs, placements, managerial costs or administration costs for setting up an apprenticeship.

All apprenticeships which started before May 2017 will not be affected by the change in how training is funded and will continue to be funded by the term and conditions in place when the apprenticeship began.

HMRC has provided guidance on the Apprenticeship Levy, including: who is required to pay the levy, how much is to be paid, how it is paid and how the annual allowance is allocated.        

If you require any further advice on this, or any other Employment law matter, please contact the Chattertons Employment law team at your nearest office.