Apprenticeship Levy Update - What this Means for Employers

HMRC is seeking comments on the amended regulations by 3 February 2017. We have reported on the previous consultations around the apprenticeship levy here.

From April, all employers operating in the UK will fund apprenticeships through the apprenticeship levy. The levy will be charged at a rate of 0.5% of an employer's pay bill. Under the new rules, employers will receive an annual allowance of £15,000 to offset against their levy payment. As a result, less than 2% of UK employers will be required to pay into the levy, although it should be noted employers within a group of companies will not each receive a separate payment of the allowance. One allowance of £15,000 will be paid to the group company who can allocate it across is business as it sees fit.

The previous draft of the regulations placed a reporting obligation on those employers whose pay bills exceeded £2.8 million in the previous tax year. This position has now been clarified. Under the amended Regulations, an employer will only be required to make a report to HMRC where it had a pay bill of over £3 million in the previous tax year - or expects to have a pay bill over £3 million in the subsequent tax year.

The Regulations also explain that the £15,000 annual levy allowance will operate on a monthly cumulative basis. This means that where an employer has an annual allowance of £15,000 and applies this to a single PAYE scheme, the employer would receive a monthly allowance of £1,250. The employer can then carry over any unused allowance from one month to the next. At the end of the tax year, if the levy has been overpaid, the employer can use the overpayment to offset against other PAYE liabilities that it may have.

The consultation on the latest draft of the Regulations can be found here. The consultation will run until 3 February 2017 with a view to the levy becoming law in April 2017.

If you have any questions on the Apprenticeship Levy, how your business can access it from April and the extent to which your business may need to make payments into the levy, please contact Mark Stevens in our Employment Law team on 0117 314 5401.