Are you ready for the new apprenticeship levy law?

It’s not long now until the new apprenticeship levy becomes law. In spring next year, the government will change the way it funds apprenticeships in England. These changes affect how apprenticeship training is funded for all employers, with employers with an annual wage bill of over ￡3 billion becoming liable to pay the levy.

In order to comply with the new levy, HR and employers need to make sure they are ready for it. To help you, we have set out what the levy means, when it comes into force, who will be liable to foot the bill, how and why.

Let’s start with the when and the who. There are three dates that HR and employers need to be aware of. Firstly, after 6 April 2017, all organisations with a wage bill of more than ￡3 million a year will be liable to pay the levy at a rate of 0.5% of their wage bill. The wage bill is defined as the total earnings of all the employees in an organisation.

All companies will receive an offset allowance of ￡15,000, equivalent to 0.5% on a payroll of ￡3 million. This will be paid in monthly instalments of ￡1,250.

Secondly, all UK employers that will be liable for the levy must declare themselves to the HMRC by 22 May 2017.

Thirdly, whether an employer is liable to pay the levy or not, the principles that apprenticeship funding will operate on come into force on 1 May 2017.

What is the purpose of the new levy?

The government thinks larger businesses should shoulder the responsibility of growing apprenticeship numbers. It is hoped that the scheme will raise ￡3 billion a year. Those funds will be used to meet the target of funding 3 million apprentices by 2020.

The levy is replacing all taxpayer funding of apprenticeship for companies of all sizes.

The Government issued a document called ‘English Apprenticeships: Our 2020 Vision’. This sets out the case for apprenticeships, explains why employers should be ‘in the driving seat’ and talks about building a long-term apprenticeships system, among other things.

Regional differences

The levy means different things for different parts of the country because apprenticeships are a devolved policy. What this means is that authorities in each of the UK nations – England, Northern Ireland, Scotland and Wales – manage their own apprenticeship programmes. That includes how the funding is spent on apprenticeship training.

English employers will be able to claim back their levy contributions as digital vouchers that they can use to pay for training apprentices. This digital voucher system will not apply in Northern Ireland, Scotland or Wales.

How will it be paid?

The levy will be collected every month through the PAYE system, alongside Income Tax and National Insurance Contributions. Single employers who operate with multiple PAYE schemes will have just one allowance.

What else do you need to know?

Levy payments will now count towards corporate tax deductions. Companies will be able to access their funding from 1 May 2017.

New national register of training providers

The government has said that there will be a new Register of Apprenticeship Training Providers (RoATP) and that it will be up and running by April 2017. Training providers that want to be on this list and deliver apprenticeship-level training need to put forward an application. Training providers must also remember to re-apply every 12 months in order to stay on the Register.

This doesn’t mean that employers can’t provide their own training. They can. However, those employers that pay the apprenticeship levy and want to provide their own training will need to ‘meet the same quality criteria’ as training providers.