In April 2017 the way the Government funds apprenticeships in England is changing. From 6th April businesses with an annual wage bill of £3 million and above will have to pay the apprenticeship levy via PAYE. However, this can be claimed back to the extent that the money is spent on training apprentices. Ultimately this can be seen as a benefit rather than a cost and offers the opportunity for development and enterprise. A key aim of the levy is to encourage businesses to take on apprentices or alternatively, up-skill their existing staff through an apprenticeship. However this does mean that large businesses need to consider the impact on their cash flow and bottom line as soon as possible.
The new apprenticeship levy comes into effect at a rate of 0.5% of the employer’s ‘pay bill’. To exclude smaller employers a £15,000 annual allowance can be claimed. The effect of this limit means that only employers with a pay bill in excess of £3 million will be required to contribute to the levy. The £3 million limit also applies to companies who are connected to other companies or charities for Employment Allowance which in total have an annual pay bill of more than £3 million.
Employers who aren’t connected to another company or charity will have an Apprenticeship Levy allowance of £15,000 each year. This means the Apprenticeship Levy you have to pay is reduced by £15,000 across the year. It is not possible for any unused allowance to be carried over to the following tax year. A new portal has been launched by the Skills Funding Agency for organisations that will be required to pay the levy from April 2017.
The pay bill will be based on total employee earnings subject to Class 1 secondary NICs including wages, bonuses and commissions. This also includes earnings below the Lower Earning Limit and the Secondary Threshold as well as employees under the age of 21 and apprentices under the age of 25. Take a look at our Apprenticeship Levy flow chart via our social media to see what funding your business could be entitled to.
As always 5four will keep you informed and are free to contact if you have any queries.