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In the 2015 Autumn Statement, George Osborne announced a new apprenticeship levy on employers to help fund employer apprenticeship schemes and reach the target of delivering three million apprenticeships by 2020. The levy has been introduced at a rate of 0.5 per cent of an employer’s payroll. All employers will receive an allowance of £15,000 to offset against payment of the levy. This effectively means that the levy will only be payable on payroll in excess of £3 million per year.
How can Microcom Training help you?
We can help you minimise the risks and maximise the opportunities associated with the Apprenticeship levy.
Microcom Training can help you:
- Define your Apprentice and skills workforce strategy
- Attract, Recruit & Match the right Apprentices for you
- Create your own personalised Apprenticeship programme
For more information please see the most recent FAQs from Skills Development Scotland below. For companies with staff in Scotland and England please see the English apprenticeship levy FAQs also.
What is the Apprenticeship Levy?
The Apprenticeship Levy is a UK Government employment tax that came into force on 6 April 2017. It is collected across the whole of the UK. All employers (public, private and third sector) with a pay bill of more than £3 million each year will pay the levy.
How it works?
The levy is set at 0.5% of an employer’s annual wage bill and each employer will receive an allowance of £15,000 per year to offset against the levy. This means that although the levy applies to all employers, only employers with a wage bill over £3 million will pay it.
Employer A has 250 employees, each with a gross salary of £20,000. They would pay:
- Pay bill: 250 x £20,000 = £5,000,000
- Levy sum: 0.5% x £5,000,000 = £25,000
- Allowance: £25,000 - £15,000 = £10,000 annual levy payment
Employer B has 100 employees, each with a gross salary of £20,000. They would pay:
- Pay bill: 100 x £20,000 = £2,000,000
- Levy sum: 0.5% x £2,000,000 = £10,000
- Allowance: £10,000 - £15,000 = £0 annual levy payment
Employers who operate multiple payrolls will only be able to claim one allowance.
You can use the Skills Funding Agency's indicative online tool for employers to estimate your levy contribution, begin your training requirements, and estimate your financial spending.
You can find further details on the calculation and payment of the apprenticeship levy on Gov.uk.
How do employers pay the apprenticeship levy?
Each month, HM Revenue and Customs (HMRC) will collect the levy through Pay As You Earn (PAYE), payable alongside income tax and National Insurance. HM Treasury will allocate funding to the Scottish Government through the block grant.
For further details on the calculation and payment of the apprenticeship levy, read HMRC draft legislation.
What do employers get back from the levy?
The Scottish Government's response to the UK Government Apprenticeship Levy sets out how they will use the £221m of levy funding over 2017/18 to support skills, training and employment in Scotland. This includes the delivery of 30,000 Modern Apprenticeship starts per year by 2020, and the establishment of a Workforce Development Fund to help employers up-skill and re-skill their workforce.
The Minister for Employability and Training, Jamie Hepburn, has emphasised that the fund will be developed with the input of employers through the Scottish Apprenticeship Advisory Board and that a working group will be set up in due course. Read further details on this in the Scottish Government's news release.
Do employers who fund their own apprenticeships still have to pay the levy?
Yes. All employers with a wage bill greater than £3million will pay the levy. Employers could review their skills needs and consider how their current training could be delivered through an approved apprenticeship to maximise their return on the levy.
Do employers who don’t pay the levy still get funding for apprenticeships?
Yes. All employers will still be able to access funding for approved apprenticeships. We recognise that apprenticeships are an essential way for SMEs to develop their employees and contribute to growth.
How will this affect employers with staff in different parts of the UK?
The levy will be paid by employers across the UK. So, employers who operate across the devolved nations will pay their contribution based on their total number of UK employees.
Will Scottish apprenticeships be funded in a similar way to apprenticeships in England?
No. Scotland and England have different administrative arrangements for funding apprenticeships.
In England, funding for apprenticeship training will be administered through a digital apprenticeship system for levy paying employers. There are no plans to adopt this system in Scotland, and apprenticeship funding will continue to be administered by SDS through contracted training providers and direct employer contracts.
Do employers who pay a training levy still have to pay this new levy?
Yes, if they have a pay bill greater than £3million, as the apprenticeship levy applies to all employers.
There are two existing industry training boards – the Construction Industry Training Board (CITB) and the Engineering Construction Industry Training Board (ECITB) – which operate their own levies.
Both bodies are in consultation with their member companies on how the new apprenticeship levy will interact with their current levy mechanisms. Both will offer more information when it is available.
What support will be available to help employers understand what these changes mean?
Microcom will work with employers to provide support as administrative arrangements are developed.
We’ll keep updating this page with the latest information for employers on the apprenticeship levy.
What is the Scottish Apprenticeship Advisory Board?
Led by employers and representatives from industry bodies across a range of sectors, the Scottish Apprenticeship Advisory Board (SAAB) will provide employer leadership and contribution to the development of apprenticeships in Scotland; ensuring they are aligned with industry and economic need, Fair Work and job opportunities. The Board consists of four groups – a Group Board, Employer Engagement Group, Employer Equalities Group and Frameworks and Standards Group.
The Board will also contribute to the Scottish Government’s consultation process on the Apprenticeship Levy and also actively encourage others with a shared interest in apprenticeships to participate.
SDS will work with the Board to ensure a demand-led, responsive and adaptive work-based learning system for employers and the Scottish economy.