If you're an employer with a pay bill over £3 million each year, you must pay the Apprenticeship Levy from 6 April 2017.
The levy will not affect the way you fund training for apprentices who started an apprenticeship programme before 1 May 2017. You'll need to carry on funding training for these apprentices under the terms and conditions that were in place at the time the apprenticeship started.
Why is the levy being introduced?
The levy is being introduced to find a step change in apprenticeship numbers and quality - delivering on the commitment that there will be 3 million additional apprenticeship starts by 2020. The levy will put apprenticeship funding on a sustainable footing and improve the technical and professional skills of the workforce.
Do I need to pay?
You will need to pay the levy if you are an employer, in any sector, with a pay bill of more than £3 million each year. The levy will be charged at a rate of 0.5% of your annual pay bill. You will have a levy allowance of £15,000 per year to offset against the levy you must pay. This means you will only pay the levy if your pay bill exceeds £3 million in a given year. You will pay the levy to HM Revenue and Customs (HMRC) through the Pay as You Earn (PAYE) process.
What happens to firms who do not need to pay?
The government will continue to provide funding for apprenticeship training.
How much funding will apprenticeships receive?
All approved apprenticeship standards will be allocated a funding cap which will indicate how much levy funding can be used for each apprenticeship.
How can you spend it?
Levy funds will be held in 'digital' accounts. They cannot be used on other associated costs such as apprentice wages, travel and subsidiary costs or the costs of setting up an apprenticeship programme. However, a range of apprenticeship training standards can be funded at all levels right up to a degree.
Can I use the levy to fund existing employees?
You can spend your levy funds on apprentice training for either existing staff or new recruits - as long as the training meets an approved standard or framework and the individual meets the apprentice eligibility criteria.
What happens if you don't spend the levy funds?
The funds will stay in your account for 24 months; if you do not use them they will be lost and redistributed to other employers.
How will this affect trailblazers?
This will not affect trailblazer apprenticeship standards. The work on these standards will continue and as new standards are ready for delivery they will be eligible for funding through the levy.
How do I use funds from my digital account to buy training?
When an apprenticeship has started, monthly payments will be automatically taken from your digital account and sent to the training provider. This spreads the cost over the lifetime of the apprenticeship. You will see funds entering your digital account each month as you pay the levy, and funds leaving the account regularly each month as you pay for training.
What should you do now?
Think of the levy as an investment - not a tax. By implementing a successful apprenticeship programme, you will be able to develop the skills of your workforce and drive business improvement.
We're already helping employers like you understand their levy payments and maximize their return on investment. Get in touch with our Leicester Apprenticeship Hub to receive impartial help and support to help you start your apprenticeship journey, and find out how we can help your business get the benefits from this investment in skills development into your company.
For more information on the levy or impartial advice on how to set up an apprenticeship programme contact Tracey Waterfield, Apprenticeship Hub manager by email.