"Fiendishly Complex” Scheme Results in Apprenticeship Levy Underpayments
The number of organisations being pursued for Apprenticeship Levy underpayment has more than doubled in a year, highlighting the wider problems that are affecting the Levy’s overall effectiveness since its introduction in 2017. Figures obtained by accountancy group UHY Hacker Young show that 84 investigations were carried out in 2018-19 collecting an additional ￡6.2m, compared to 33 investigations in 2017-18.
The 155% rise in investigations into Apprenticeship Levy underpayment, we believe, boils down to a lack of clarity and understanding. An increasing number of employers are finding the levy scheme difficult to navigate, and as a result, are miscalculating the amounts due, which is leaving them at risk of incurring significant fines from HMRC.
There has been very little accessible advice or guidance for employers regarding the Apprenticeship Levy and many see the levy as another ‘stealth tax’, which fails to bridge the skills-gap. We’re discovering that many employers are spending vast amounts on commercial training while simultaneously paying six or seven figure sums into the levy. Many businesses simply haven’t realised that spending can be offset against their levy contributions and are essentially paying for training twice.
Partner at UHY Hacker Young, Clive Gawthorpe, said the high number of investigations being launched by HMRC highlights the wider problems that are affecting the Apprenticeship Levy’s overall effectiveness, describing the scheme as “fiendishly complex”. The rise in the number of investigations suggests that HMRC is now widening its net after initially focusing on larger businesses where the value of underpayments was likely to have been higher.
UNDERSTANDING THE LEVY
Since April 2017, any company with an annual payroll in excess of ￡3 million has been required to make monthly payments to the Apprenticeship Levy; an initiative launched by the government to encourage employers to invest in training.
Unfortunately, there has been very little accessible advice or guidance for employers and many see the levy as another ‘stealth tax’ which fails to bridge the skills-gap.
Figures revealed by the National Audit Office in March show that despite UK employers having deposited ￡2.2 billion into the Levy in 2017-18, only 9% of the total has been accessed and reinvested in staff training and development programmes.
The scheme is part of the government’s strategy to boost productivity and aims to develop vocational skills by increasing the quality and quantity of apprenticeships offered by employers.
Businesses can withdraw the total value of their contributions to fund apprenticeship schemes through recognised training providers within two years of the payment dates; any money not accessed within that timescale is lost to the Exchequer with the first contributions becoming forfeit from April 2019. That means businesses will start to lose money in just a matter of weeks and do not appear to be taking action.
UNLOCKING THE LEVY
Jonathan Lee Skills Consultancy makes it simple for clients to utilise Apprenticeship Levy funds to address skills gaps and improve employee retention, thus driving productivity and growth, all while putting money back on the bottom line. To find out more click here.
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If you would like to find out how to make your Apprenticeship Levy work for you, contact one of our team.
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