This article explains some of the changes and actions that employing academies and MATs should consider. As this article explains, change is afoot which will affect all employers, regardless of whether they are required to pay the levy.
The government has made a commitment for there to be three million new apprenticeships by 2020. To this end, the government will introduce a new 'apprenticeship levy' which will increase the amount of funding available for apprenticeship training across the UK.
The apprenticeship levy is charged to all UK employers at 0.5% of their annual pay bill. However, all employers are allocated a £15,000 'levy allowance' which is offset against this liability. This means only employers with a gross annual pay bill of more than £3 million will actually pay the levy (because 0.5% x £3 million = £15,000).
Each month, such employers will need to inform HMRC whether it needs to pay the levy and include the levy payment in their PAYE payment to HMRC. Only employers with: an annual pay bill of £2.8million in the previous tax year, or that consider their pay bill will be over £3 million for the current tax year, are required to declare their levy liability.
The levy funds paid are collected in an employer's 'digital apprenticeship service account' and a 10% government top up is applied. The funds can then be spent on approved apprenticeship training. However, funds which are not used within 24 months will expire.
Levy paying employers will be able to register for an account from January 2017.
Academies or MATs who are not in scope to report to HMRC, or pay the levy, are not required to take any positive action in respect of the levy, unless they find an obligation to pay the levy arises during the tax year. This might occur where a MAT acquires further academies, or academies join together to form a MAT. Where this is a possibility, mechanisms will need to be in place to identify whether the levy is due to be paid.
In addition to the introduction of the levy, the government is introducing a digital apprenticeship service, which will assist all employers (regardless of whether they pay the levy) to identify and develop training programmes and recruit apprentices.
The government have confirmed the rate of co-investment for apprenticeship training (90% from the government and 10% from the employer) and issued guidance about becoming a training provider. Overall, there will be more funding available, which may present an opportunity for academies and MATs.
Academies and MATs will need to identify whether they are in scope to declare and pay the levy before it comes into effect in April 2017.
All employers should consider whether there are opportunities for using apprentices in their workforce to ensure that they are making the most of the available funding. There is a 'Supporting teaching and learning in schools' apprenticeship framework, which will be relevant to MATs and academies (for example, for training teaching assistants, learning support assistants, bilingual support assistants etc.). There may be a wide range of apprenticeship standards on the support side, ranging from marketing, to IT, grounds staff and catering. All approved apprenticeship standards and frameworks can be found on the government website.
If the levy paid is not used by the levy paying employer within 24 months, it is lost to them and cannot be allocated against other liabilities. Having said this, it is important to note the levy can only be used to pay for approved training costs. Other associated costs (e.g. salary for the apprentice) will need to be borne by the employer.
Where a levy paying academy or MAT wishes to take on an apprentice, it should note that levy funds cannot be used to pay for apprenticeship training where the arrangements are in place before April 2017. It may therefore be sensible to await April 2017 where possible.
Any academy or MAT which is considering taking on an apprentice will need to ensure that an appropriate apprenticeship agreement, which meets statutory requirements, is in place before the start of the apprenticeship. This is a pre-requisite for access to apprenticeship funds in an employer's digital account, but is also important in order to ensure academy or MAT's position is protected.
If you are interested in these changes, we recommend you view our detailed FAQ document.