The Apprenticeship Levy is set to arrive next April, bringing profound changes to the way Apprenticeships are funded and training is procured for many organisations.
Despite this looming deadline, recent research from the British Chambers of Commerce (BCC) found that 39% of UK firms that it surveyed were completely unprepared for its arrival.
Organisations of all shapes and sizes across the country will meet the financial criteria necessary to become Levy payers and organisations that make up parts of a group structure will face several unique challenges.
In this guide, we’ll take a look at how the Levy will affect group organisations and the options they’ll have available when it comes to investing in training and apprenticeships.
Apprenticeship Levy Criteria
Organisations with an annual payroll of more than £3 million will face a 0.5% tax on their overall UK pay bill, which will be paid via Pay As You Earn (PAYE). The government will also add in a 10% top-up to these funds (with a couple of caveats), which will be applied on a monthly basis.
Initial estimates from the government suggested that 2% of employers in the UK, or around 22,000 organisations would be required to pay the Levy, with figures released by the Department for Education in August suggesting that 19,150 companies would be affected.
Many organisations, such as schools and charities, have been surprised to discover they fall under the Levy’s scope, and businesses that operate as part of a group of companies with an overall payroll of more than £3 million will be forced to prepare for the roll-out of the legislation.
How the Apprenticeship Levy affects organisations within groups
Levy payers are permitted a £15,000 allowance that’ll be deducted from the 0.5% of their pay bill they’re taxed on, however, group organisations will be forced to share this deduction among their constituent companies.
This can either be concentrated within one group company, or split among several and organisations need to decide on how they’ll share it out by the beginning of each tax year. This is then fixed until the following tax year, unless a correction is required due to miscalculations.
Once the decision has been made, each group company will need to work out what they’ll pay when their portion of the allowance is taken into account.
On the upside, group companies can opt to pool the funds they pay into the Levy by registering to have their PAYE schemes associated with a single Digital Account. If you’re connected for tax purposes, you’ll have the ability to add payroll numbers, but for the time being, this is something you’ll have to do via HMRC.
While there are plans in place to enable the ‘gifting’ of Digital Account funds to other organisations, these won’t come into force until 2018 and will then only allow the transfer of up to 10% of funds. This puts groups at something of an advantage in the meantime, since they can opt to utilise the entire organisation’s funds for the benefit of one, or several, of their constituent companies.
Groups with constituent organisations spread out across the UK will face the Levy funds they have available to spend on training being further diluted. While they’ll pay the levy on 100% of their UK pay bill, groups will only be allocated the portion that relates to their English workforce in their digital accounts. Similarly, the government’s 10% top-up payments will only apply to the funds in your Digital Account, rather than your overall Levy bill.
Skills policies are devolved, which means the sum of your Levy payments that relates to workers in Scotland, Wales and Northern Ireland will not make its way into your Digital Account, instead being paid directly to these countries’ governments.
How the devolved nations of the UK will use their portion of Levy funds has yet to be decided, but there’s currently no firm plans in the pipeline to set up similar systems to that which will be rolled out in England.
Using your funds
While you may associate apprenticeships with taking on young people fresh out of education, the funds you’ll accrue in your Digital Account can also be used to reskill or upskill existing staff in a variety of ways.
The current SASE (the Specification for Apprenticeship Standards for England) are in the process of being replaced by a new series of standards, created by employers - for employers, to cater for the demands of a variety of unique occupations.
Hundreds of these so-called ‘Trailblazer’ standards have been approved to date, with many more being developed. The Skills Funding Agency has published a comprehensive list of these online, as well as details of those currently in development - making it much easier to find a training programme that could be of real benefit to your business.
And if you’re looking for support with meeting managing your Levy funds, procuring training - or just have a quick question - don’t hesitate to book a quick chat with our team of experts now: