Apprenticeship Levy

Guidance Presentation

Laura Pickering

MTA Learning & Development Co-ordinator

Version 1 – July 2016

This presentation

The MTA has created this presentation to provide guidance on the

Apprenticeship Levy

Please ensure you read this presentation through from start to finish – a

lot of questions that you might have based on the first couple of slides will

mostly be answered later in the presentation

What, When and Why?

The Apprenticeship Levy will be a 0.5% tax on employers with an annual

pay bill of £3m or more, to fund new apprenticeships

The pay bill includes ALL employed staff across the UK

There will be a £15,000 allowance to offset the Levy – please see next

slide

The Levy will be implemented from 6 April 2017

The Levy is part of a broader programme of reforms

The Levy will impact quite a few MTA members, therefore we have

created this guidance presentation for you to raise awareness within your

organisation and to help with budget planning for the next tax year

Will I have to pay the Levy?

Example 1: an employer who would pay the Levy

An employer with an annual pay bill of £5,000,000:

Levy sum: 0.5% x £5,000,000 = £25,000

Subtracting Levy allowance: £25,000 - £15,000 = £10,000 annual levy

payment

Example 2: an employer who would not have to pay the Levy

An employer with an annual pay bill of £2,000,000:

Levy sum: 0.5% x £2,000,000 = £10,000

Subtracting Levy allowance: £10,000 - £15,000 = £0 annual levy payment

Visit http://levy-calculator.icon-training.com/ for your own Levy estimate

What if I am a connected company?

Where a group of employers are connected they will only be able to use

one £15,000 allowance. The definition of connected companies and

charities is the same as the definition used with the Employment

Allowance.

The government intends to introduce an amendment to the Finance Bill

2016 concerning the allocation of the levy allowance. The amendment will

mean that if you are part of a group of connected employers, you must

decide what proportion of the levy allowance each employer in the group

will be entitled to. This decision must be taken at the beginning of the tax

year and will be fixed for that tax year. Each employer will then calculate

what they have to pay through the same processes set out above, but

using their portion of the £15,000 allowance.

What if I am a connected company?

Directing levy funds to other employers

In the first year of the levy, you will be able to use the funds in your levy

account to pay for apprenticeship training and assessment for your own

employees.

Some employers might wish to direct their funding to other employers.

This issue is still under review.

Pooling funds in a levy account with other employers

If you are in a group of companies connected for the purposes of paying

the levy, your group will be able to collect their funds together into one

account.

Employers that are not connected will not be able to pool funds in a levy

account using the digital service. However, you will be free to co-ordinate

your spending at local or sector level outside of the digital service.

How will I pay the Levy?

You will calculate, report and pay your levy to HMRC, through the Pay as

You Earn (PAYE) process alongside tax and National Insurance

Contributions (NICs)

Online tools for employers will be available via the digital apprenticeship

service over the next year. You will be able to register to create your

account from January 2017 and you’ll be able to familiarise yourself with

the service

Levy-paying employers will be able to use the service to pay for the

training and assessment of apprentices from April 2017

When you’ve registered, you’ll need to verify your Pay as You Earn

(PAYE) schemes and link them to your account. You will be able to use

more than one account if you’d like to keep your schemes separate.

How can I benefit from the Levy?

Employers who pay the levy and are committed to apprenticeships

training will be able to get out more than they pay in to the levy.

The government will apply a 10% top-up to monthly funds entering levy

paying employers’ digital accounts, for apprenticeship training in England,

from April 2017.

Levy-paying employers will be able to use the service to pay for the

training and assessment of apprentices from April 2017

Example:

Employer has £12,000 annually entering their levy account

Monthly account funding = £1,000

Top up: 10% x £1,000 = £100

Levy monthly account increase: £1,000 + £100 = £1,100

£13,200 annually to spend on Apprenticeships

Contributions outside of the Levy

There are two types of employers who will be required to contribute outside

the levy towards the cost of their apprenticeships training:

1. Employers who haven’t paid into the levy.

2. Employers who have used all funds in their digital apprenticeship account.

These employers will be required to co-invest a small proportion of funding

towards the cost of their apprenticeships training. These “costs” are as yet

unknown.

How will the Levy work?

Image source: BDO

What about staff outside England?

Companies that are eligible to pay for the levy will be taxed on 100% of

their staff, regardless of where they live or work in the UK

However, companies will only receive funding back for apprentices that

live in England, irrespective of where they work.

For example, if 20% of your staff live in Wales, Scotland or Northern

Ireland you will only receive 80% of the potential £15,000 funding into

your digital account.

Wales, Scotland and Norther Ireland will be given their remaining % of the

funding from the Government for employees based in those countries, it is

up to those countries how the money is spent

Do check the HMRC has the correct information regarding your

employee’s locations.

Accessing Levy funding

Once you have paid the levy to HM Revenue and Customs (HMRC) you

will be able to access funding for apprenticeships through a new digital

apprenticeship service account.

You will be able to use this to pay for training and assessment for

apprentices in England. The service will also help you find training

providers to help you develop and deliver your apprenticeship

programme.

Separate arrangements will be in place in Scotland, Wales and Northern

Ireland.

What can I use my Levy funds for?

Funds can be used for:

apprenticeship training and assessment (with an approved training

provider and assessment organisation up to its funding band maximum).

Funds cannot be used for:

wages

statutory licences to practise

travel and subsidiary costs

managerial costs

traineeships

work placement programmes

the costs of setting up an apprenticeship programme

Can I use the funds for existing employees?

Yes, so long as the training meets an approved Apprenticeship standard

or framework and the proposed candidate meets the eligibility criteria for

apprentices.

However exiting apprentices can continue on their current programme.

Only apprentices employed after 6 April 2017 will be affected by the new

Levy legislation

Approved training providers

To deliver training the employer would need to register as an approved

provider and be subject to Skills Funding Agency (SFA) quality

arrangements and Ofsted inspection.

You can use different training providers. Our advice would be find one

training provider that can manage your apprenticeship programmes

including multiple suppliers.

The Government currently has this list of approved providers. Please

check that your training provider is planning to register for this

http://findatrainingorganisation.nas.apprenticeships.org.uk/

To register as an Apprentice Training Agency visit

https://www.gov.uk/government/publications/become-a-recognised-

apprenticeship-training-agency

Training providers must comply with the SFA funding rules

https://www.gov.uk/guidance/sfa-funding-rules

Funding limits

Employers will not be able to spend an unlimited amount of money on a

single apprentice.

Funding bands will be set which limit the amount of levy funds an

employer can spend on training for an individual apprentice.

The band will vary according to the level and type of apprenticeship (for

example, more expensive, higher quality training is likely to be in a band

with a higher limit).

Setting limits to the amount of government or levy funding that can be

used for apprenticeships will enable employers to increase the quantity of

apprenticeships they can purchase with their funding, whilst ensuring that

quality training does not become too expensive for employers to

purchase.

The Government has yet to announce the funding bands

Funding limits

Image source: BDO

Additional Funding

Funding 16-18 year olds: Payment to help meet the additional costs

associated with employing young apprentices will be paid to you via the

training provider.

Funding for disadvantaged individuals: You will receive the same payment

(as for a 16-18 year old apprentice) if you recruit young people who are

aged 19-24 who have an Education and Healthcare Plan provided by the

local authority or if you employ a 19-24 year old that has been in the care

of the Local Authority.

Funding for additional learning support: If your apprentice needs extra

support to help meet additional learning needs, payments can be made

direct to the training provider to pay for these.

Funding for English and Maths training: If your apprentice doesn’t already

have the required minimum standard in English and Maths they may need

to undertake an English and/or Maths course. Funding might be available

for this.

Will BREXIT impact the levy?

It was announced at the beginning of July that there would be a "little

delay" in providing further funding information following the British public's

decision to leave the European Union , but said "we should all continue to

assume and work on the assumption that the apprenticeship levy is

coming in, as planned”.

Mark Dawe, Chief Executive of the Association of Employment and

Learning Providers (AELP), was among those who argued it was now

more important than ever to press ahead with apprenticeship plans. "If

anything, the referendum result means that a skilled British workforce will

be needed more than ever, so the target of three million apprenticeship

starts by 2020 takes on a new significance."

What about MTA Apprenticeship Grants?

The MTA offers training grants of up to £500, apprenticeship grants of

£2,000 and interest-free apprenticeship loans of £10,000

Regardless of whether you have to pay the Levy or not, you will still be

eligible to apply for this funding as long as:

You have been an MTA member for at least one year

Your annual turnover is less that £10m

If you are interested in applying for any of the above, please contact

lpickering@mta.org.uk for more information

Levy: The MTA’s views

In theory the Levy could be a good move for the manufacturing industry,

provided it is easy to administer

Employers pay 0% National Insurance Contributions for apprentices

under 25 years of age

There are subsidies for non-levy paying businesses in the form of co-

investment

There is the potential to re-categorise some employees as apprentices

You could become an approved apprentice training provider (see slide 15)

We expect the list of approved training providers to grow considerably

before the Levy is implemented

Levy: The MTA’s concerns

The MTA has serious concerns regarding the amount of time left to

provide clarity to businesses so that they are able to set their budgets for

the next tax year.

Final information will not be made available until December 2016. There

have been calls to postpone the implementation of the Apprenticeship

Levy to 2018 however the Government has confirmed it will not be

delaying the start.

At 0.5%, the Levy has been set at too high a level

The administration of the Levy is bureaucratic

The speed at which the Levy will be implemented is too fast

There is a lack of clarity in communication of detail

There is a lack of clarity regarding the implementation of the digital portal.

What next?

The Government was due to release additional funding information in

June 2016: https://www.gov.uk/government/publications/apprenticeship-

levy-how-it-will-work/apprenticeship-levy-how-it-will-work#when-further-

information-will-be-available

Further guidance is expected from BIS as follows:

June (now delayed due to BREXIT): provisional funding and eligibility

rules, information on how to become an approved trainer

October: full draft funding and eligibility rules

December: final detailed funding and eligibility rules

The MTA will revise this presentation after new guidance is issued

More information

In the first instance please visit www.gov.uk and search for Apprenticeship

Levy pages – these should be updated soon

The MTA would like to thank BIS and BDO, whose informative breakfast

sessions aided the content of this presentation

Useful sites

https://www.gov.uk/government/publications/apprenticeship-levy-how-it-

will-work/apprenticeship-levy-how-it-will-work

https://www.gov.uk/government/publications/apprenticeship-levy-how-it-

will-work/apprenticeship-levy-how-it-will-work#when-further-information-

will-be-available

https://www.gov.uk/government/organisations/skills-funding-agency/about

http://feweek.co.uk/wp-content/uploads/2015/08/Apprenticeship-levy-

briefing-paper-FINAL-2.pdf

https://www.gov.uk/government/collections/apprenticeship-grant-for-

employers-of-16-to-24-year-olds