The Apprenticeship Levy aims to fund three million apprenticeships in the UK by 2020. If your annual payroll is more than £3m you will pay 0.5% of the value of the payroll into the apprenticeship levy each month, the Government adds 10% to the amount you pay each month.
Every employer will receive a £15,000 allowance to offset against the levy. The main aim is to persuade employers to take on more apprentices. Employers will be issued with a digital voucher to enable them to purchase training from a recognised provider.
See further guidance on the following site:
https://www.gov.uk/guidance/pay-apprenticeship-levy
The figure of £3m is based on payments to employees subject to Class 1 Secondary National Insurance Contributions (NICs) excepting those under the age of 16 or those whose earnings aren’t subject to NIC legislation.
CALCULATING APPRENTICESHIP LEVY
In the first month £250,000 of wages (£3,000,000 / 12 = £250,000) is not subject to the apprenticeship levy, so to arrive at the payable figure, deduct £250,000 from the monthly pay bill and 0.5% of the balance is payable to HMRC.
In each month subsequent month, you need to compare the cumulative wages after deduction of £250,000 per month. For example, in month 3 a company with a cumulative wage bill of £1,200,000 can deduct £750,000 (£250,000 x 3) from this and the cumulative apprenticeship levy is therefore £450,000 x 0.5%= £2,250. The amount payable in month 3 is therefore £2,250 less the payments made in the previous two months.
Please note the figure of £3m includes any connected companies’ payrolls, so even if the production pay bill is less than £3m you still need to find out if your company is owned by a group whose payroll as a whole exceeds the £3m.
You must report Apprenticeship Levy payments to HMRC from the start of the tax year if you either had a payroll of over £3m in the previous tax year or you think your annual payroll for the new tax year will be more than £3m.
If at any point in the tax year it becomes apparent your annual payroll will exceed £3m you must start reporting.
If you’ve started paying Apprenticeship Levy and it turns out your payroll will be less than £3m you’ll still need to continue reporting it until the end of the tax year.
Any information upon which the levy payment has been calculated must be recorded and kept for at least 3 years after the tax year which they relate to.
PAYING THE APPRENTICESHIP LEVY
The Apprenticeship Levy should be paid in the same way as Income Tax or National Insurance Contributions via the PAYE process. Any overpayments will be refunded as a PAYE refund.
THE APPRENTICESHIP LEVY AND SPECIAL PURPOSE VEHICLES (SPV)
An SPV that will be short-lived (i.e. operate for less than a whole financial year) will still have to pay the levy if it is liable for Class 1 secondary NICs.
Companies set up part way through the tax year will have the full £15,000 allowance available.
USING THE FUNDS IN YOUR APPRENTICESHIP SERVICE ACCOUNT
There are very specific rules governing what the funds in the account can be used for.
Primarily the funds are for the training and assessment of apprentices. They cannot be used for other costs associated with apprentices. There are also funding band maximums for different apprenticeships so any additional needs to be funding by the company.
Read the following links for details of how to use the funds in your Apprenticeship Service Account
https://www.gov.uk/government/publications/apprenticeship-funding-bands
