Substantial changes to how apprenticeship programmes in the UK are funded, were introduced in April 2017. Since then, employers with an annual UK payroll bill in excess of £3 million have been required to pay the equivalent of half a percent of the excess into their own dedicated apprenticeship service account.
Who pays the Levy and how much is paid?
Although all public and private sector organisations based in the UK are classed as being in-scope, currently only those with an annual payroll bill in excess of £3 million pay the Levy. The calculation for how much an organisation’s Levy payments will be, is based upon its total employee earnings subject to class 1 secondary National Insurance contributions. All organisations within England, Wales, Scotland and Northern Ireland whose payroll bill meets the criteria must pay the Levy and there are no exemptions.
How is the Levy paid?
Levy payments are collected by HM Revenue and Customs (HMRC) through the Pay As You Earn (PAYE) process in the same way that tax and National Insurance contributions are made. Employers calculate the amount of Levy to be paid, based upon the previous month’s payroll bill and are responsible for declaring this to HMRC, who will then collect the Levy, along with the other payroll taxes and transfer this across to the employers’ apprenticeship service account, if they have one set up. Employers are responsible for setting up their own apprenticeship service account and this is normally done by someone in the payroll department using the employers Government Gateway account. We understand that this can be quite complicated so, if your company does not yet have an apprenticeship service account, is uncertain how to set one up or requires assistance in doing so, UCQ would be pleased to help – call or email us and we will be in touch to help.
How much will I have to spend?
The amount you will have to spend will comprise of your Levy payments plus a Government top up of 10%. In simple terms, Levy payments will be equivalent to a half a percent of your company’s UK payroll cost in excess of £3 million per annum; broadly speaking this equates to a Levy payment of £5000 for every £1 million of qualifying payroll cost. As a rough example, an employer with an annual UK payroll bill of £10 million could expect to pay (£10,000,000-£3,000,000) x 0.5% = £35,000. The Government will top this up by 10%, which means that the total value of funds available to spend on approved apprenticeship programmes will be £38,500.