Charities and not-for-profit (NFP) organisations aren’t exempt from the raft of changes to training and apprenticeships that are being brought into force this April.
In this guide, we’ll examine the implications of the Apprenticeship Levy for charities and NFPs and how they can best deploy their budget to make the Levy work for them.
Any organisation with an annual pay bill of more than £3 million will fall within the scope of the Levy, and will have to contribute 0.5% of their payroll (minus a £15,000 allowance) into the scheme via PAYE.
These funds will be deposited into a Apprenticeship Service account (ASA) each month and will be topped up by 10% by the government. From here, employers can direct these funds to training providers and use them to pay for apprenticeship training and assessment.
Organisations that fall below this threshold (or who have used up all the funds in their ASA can still take advantage of funding for apprenticeship-based training, however, by means of co-investment.
This route enables the employer to contribute 10% of the price of the apprenticeship, with the government making up the other 90%.
You can find more detailed guidance on how apprenticeship levy funding works in our stand-alone guide.
Charities and NFPs that are part of a group
For the purposes of the Levy, being part of a group can be something of a double-edged sword for charities and NFPs. Group organisations only get one £15,000 allowance to use between them, which they can opt to split among several of their constituent companies or concentrate in a single one.
However, they are able to pool their Levy funds by registering to associate their PAYE schemes with a single ASA.
Group organisations also have the inside track when it comes to transferring their ASA funds to other connected companies. While plans are in the works to allow non-group companies to ‘gift’ funds to other organisations, these aren’t scheduled to come into force until 2018 at the earliest.
In the meantime, group organisations are able to deploy their funds in whatever way they see fit, spreading them across all constituent companies or using them for the benefit of one, or several.
Challenges for charities
The introduction of the Levy will pose several challenges for charities, many of whom are restricted on what they can spend much of their funds on.
While the rules about restrictions are fairly complex within themselves, in general, funds donated for a specific purpose must be used in that regard. These can’t undergo radical changes without jumping through several legal hoops (or even facing fraud, or deception, charges).
Charities and NFPs also have to contend with often-limited resources and without a skills council for the sector, are left to their own devices when it comes to identifying their training needs. This also puts them at something of a disadvantage when it comes to developing relevant apprenticeships.
However, one organisation - Fairtrain - has taken this challenge head-on and is seeking to develop new standards to address skill gaps in the voluntary and community sector. Charities interested in contributing to the development of these standards can register their interest with Fairtrain here.
Charities have been particularly resistant to the introduction of the Levy, with organisations like the Charity Finance Group (CFG) warning that they could face a massive reduction in donations, since the legislation will raise uncertainties for donors on how their donations are being spent.
“If the government decides to push ahead with the existing timetable we will see vital charitable funds being redirected away from the causes which they were intended to support,” said CFG chief executive Caron Bradshaw in August last year.
“The sector has only recently come out of recession and will not be immune to the economic challenges that Brexit threatens. History has shown that in times of economic uncertainty demand on charities’ front line services increases, we cannot therefore risk losing vital funds through a policy that, in its current form, will not support our members to achieve their charitable objectives.”
Concerns were also raised that the charity sector lacked a skills council and that charitable donations would be used to subsidise apprenticeships for employers in the private sector.
The Charity Tax Group (CTG) also called for greater flexibility in enabling organisations in the sector the ability to donate any Levy funds they couldn’t use to other charities with similar activities.
Since Apprenticeship Levy funding can only be used to pay for training and assessment (rather than wages or other subsidies) charities that qualify as a Levy-payer will have to contribute and pay wages for apprenticeships out of their other funds.
While navigating the complexities of the Apprenticeship Levy can be difficult for charities and NFPs, hopefully we’ve managed to shed some light on a few of the key issues.
But if you’ve got any questions, or want to share your thoughts - be sure to get in touch via Twitter or LinkedIn.
And if you’re part of a charitable organisation looking for tailored advice on how best to engage with the Levy - get in touch with our team of experts for an obligation-free chat today.