The Department for Business, Innovation and Skills has today published its guidance for employers on the apprenticeship levy. The guidance is aimed at all employers, both those who will (from April 2017) pay the levy and those will not be levy paying businesses. The guidance does not contain any information on funding levels and so employers will have to wait until June to see draft funding rates. The final rates will not be confirmed until October 2016 and the complete suite of funding and eligibility rules will not be published before December 2016. Find out more about the apprentice levy as well as find other apprenticeship resources on EEF’s apprentice levy page.
The guidance does provide some confirmation of the following issues:
What counts as “pay bill”, upon which the levy of 0.5% is to be paid?
Pay bill will be earnings subject to the Class 1 secondary NICs payment – the employer NICs. It will not include earnings which are subject to Class 1A NICs, such as benefits in kind.
How will the £15,000 allowance work?
The annual allowance will be claimed monthly, in tranches of £1,250. Unused elements will accumulate and be carried forward to later months. Employers whose liability for the levy exceeds their allowance to date will therefore pay the levy, even if over the financial year, their total pay bill is less than £3 million. They will then be entitled to a rebate for any payments made. The levy will be paid monthly, alongside PAYE, to HMRC.
Rules on connected companies
A group of connected companies will only be entitled to one £15,000 annual allowance. The previously announced system for the allowance is, however, to be changed, allowing connected companies to divide the annual allowance between them. This election must be made at the start of the tax year and cannot subsequently be altered.
Group companies to be able to pool their vouchers
Connected companies will be able to pool their training vouchers in a single account in the new Digital Apprenticeship Service, or DAS. Companies which are not connected, for example those that do not share common ownership, will not be able to transfer their vouchers to one another.
Apprentices who start before April 2017
Any apprentice accepted on an apprenticeship programme before April 2017 will be funded for the duration of their apprenticeship under their existing funding arrangements. Employers will not be able to pay for their training using their digital vouchers.
Employers who do not pay the apprenticeship levy
Employers who are not levy payers will still be able to access public support for their apprenticeship training costs. Government will pay for part of the costs directly to their training provider, after the provider has confirmed that the employer has paid a share of the training costs. This rate, or share, which the employer will need to pay has not been announced.
Spending the digital vouchers
The guidance states that once an employer reaches an agreement with a training provider, then the vouchers will automatically be transferred to the provider monthly. The monthly payments cannot be changed by the employer, although the employer can ask that the payments are stopped or paused. The digital vouchers will last 18 months, and unless spent, will then expire. Voucher payments made from the digital account will automatically draw on the eldest vouchers first. Vouchers can only be spent on training with an accredited provider and for an English apprenticeship framework or standard.
Whilst the guidance provides some welcome clarification on some points, there is still much to be worked out. Critically, employers still have no visibility on how much they will be able to spend on each apprentice. Larger employers will not be able to use their vouchers to train their supply chains and the window of opportunity to spend the vouchers is shorter than had been hoped. The rules on connected companies are to be changed, but are now considerably more complex. Those with existing businesses who then start or acquire a controlling interest in a second seem to be required to pay the levy, at least for the first year, even if the second business is very small. The announcement that apprentices who start before April 2017 will continue with their current funding arrangements is welcome, but employers using an Apprentice Training Agency, or ATA, won’t be able to use their vouchers to help with the cost of training. Overall, employers will need much more clarity on the levy before deciding how they will be able to operate it and whether it will be a tax or provide some genuine support for those investing in apprenticeships.
Read the full guidance from the Department for Business, Innovation and Skills. For more information on the apprenticeship levy, you can contact EEF Director of Employment and Skills Policy, Tim Thomas.
If you are a customer working with our apprentices team at Aston, please contact Neil Withey for more details on how the levy will affect your company.