APPRENTICESHIP LEVY WHAT YOU NEED TO KNOW

Transcription

1 APPRENTICESHIP LEVY WHAT YOU NEED TO KNOW

2 APPRENTICESHIP LEVY - THE BACKGROUND WHO NEEDS TO REPORT THE APPRENTICESHIP LEVY? Employers only need to report the Apprenticeship Levy to HMRC if they are likely to have a liability to pay it. This will be where their annual pay bill exceeds 3m. There are special rules for connected companies and charities who in total have an annual pay bill of more than 3m. HOW IS THE LEVY DETERMINED AND PAID? The levy is an annual charge, although it is reported on and paid monthly at the same time as the employer pays income tax and NICs. The levy is based on the employer's pay bill which is the total amount of earnings subject to Class 1 secondary NICs, including all earnings below the secondary threshold. It does not include employer's NIC and most employer pension contributions will not count as earnings for these purposes. If the pay bill exceeds 3m, the 0.5% levy is applied. The employer then deducts the 15,000 annual allowance against the levy liability. So, for example, an employer with an annual pay bill of 20m will be required to make an annual levy contribution of 85,000. Any Apprenticeship Levy payment to HMRC will be allowable for Corporation Tax. ACCESSING THE FUNDING The levy is designed to encourage employers to support apprenticeships, but a employers should develop a strategy on how to access the funding as it operates on a use it or lose it basis. The funding is available to: 1 All employers who have contributed to the levy. 2 Employers who have not contributed (as their pay bill is below 3m) or employers who would like to invest more in training than they have available in their digital accounts this is known as 'Co-investment'. 3 Employers with fewer than 50 employees, who will be able to access funding for year olds without making a contribution towards the funding this is 'Small employer co- investment waiver'. The funding will be made available via a digital account and you can now register on the website: The set-up process is complete, so The Skills Funding Agency have provided some FAQs here:

3 WHERE TO REGISTER Your digital account will look like this after you have registered: Source: gov.uk

4 WHAT HAPPENS TO MY LEVY PAYMENTS? EMPLOYERS WHO ARE CONTRIBUTORS TO THE LEVY Employers in England will be able to claim back their levy contribution in the form of digital vouchers, which they can then use to pay for training apprentices from 1 May Any qualifying apprenticeships started from this date will be funded according to the new rules. Employers in England will also qualify for a 10% top- up to their levy contribution. For example, the top up can be illustrated as follows: Pay bill Levy payment Top up Training fund amount 5,000,000 10,000 1,000 11,000 7,500,000 22,500 2,250 24,750 10,000,000 35,000 3,500 38,500 12,500,000 47,500 4,750 52,250 15,000,000 60,000 6,000 66,000 20,000,000 85,000 8,500 93,500 25,000, ,000 11, ,000 Employers who pay the levy will see unused funds in their digital account expire 24 months after they appear in their digital account. This will also apply to the 10% top-up they receive. The oldest funds in the account will be used first. Employers should therefore regard the funds as use it or lose it. At present the funds page is not live, but will look like this: Source: gov.uk

5 WHAT HAPPENS TO MY LEVY PAYMENTS? The levy will be introduced alongside a new online Digital Apprenticeship Service (DAS). The DAS will require an employer to register their details online. When that employer wants to draw down from the levy fund, they will need to register the details of that apprentice (age, the standard they will be on, etc.) which will then tell the employer how much levy they can draw down, in the form of the voucher. These vouchers can then be used by the employer to spend on training with a registered training provider. How much an employer can draw down from the levy will be dependent on the standard or framework the apprentice is starting on. Vouchers from the DAS can only be spent with registered training providers. The new online system will list the register providers where vouchers can be spent. Vouchers can only be spent on apprenticeship training, not wider costs (e.g. salaries). CAP ON FUNDING BASED ON BANDS Under the new system, the amount that an employer can spend on a single (i.e. an individuals) apprenticeship training and assessment program will depend on which band that apprenticeship is in. There will be 15 funding bands, with the upper limit of these bands ranging from 1,500 to 27,000. The upper limit of each funding band will cap the maximum amount of digital funds a levy-paying employer can use towards that apprenticeship. For non-levy payers, the cap limits the maximum price that government will co-invest towards the training. As an employer, when you agree to buy apprenticeship training from a particular training provider and the apprenticeship has started, monthly payments will automatically be taken from your digital account and sent to the provider. As an employer, you will not have control of these payments. CO-INVESTMENT Employers who do not pay the levy (or those that would like to invest more in training than they have available in their digital accounts) will still be able to access funding, however, they will be required to 'co-invest'. Co-investment requires the employer to fund 10% of the cost of the apprenticeship (up to the funding band limit) with the Government paying the remaining 90%. Any cost in excess of the funding band limit will need to be met in full by the employer. SMALL EMPLOYER CO-INVESTMENT WAIVER Employers with fewer than 50 people working for them will be able to train year old apprentices without making any contribution towards the cost of training and assessment, up to the funding band maximum. Therefore this will be 100% funded by the Government. SHARING DIGITAL VOUCHERS WITHIN A GROUP Vouchers can be used across a company group, (that is between connected companies ). The DAS system will allow group companies to pool the vouchers and then spend them throughout the group.

6 GROUPS AND CONNECTED COMPANIES HOW THE APPRENTICESHIP LEVY WILL APPLY TO GROUPS AND CONNECTED COMPANIES FROM APRIL 2017 Employers have to pay the new Apprenticeship Levy each month from 6 April 2017 if they: Have an annual pay bill of more than 3 million; or Are connected to other companies which in total have an annual pay bill of more than 3 million Companies which are within a group, or are connected through common ownership, will be deemed to be connected. The employer s annual pay bill is all payments to employees that are subject to employer Class 1 Secondary NIC, such as wages, bonuses and commissions. Employers who aren t connected to another company will have an Apprenticeship Levy allowance of 15,000 each year. The allowance reduces the amount of Apprenticeship Levy which a single, stand alone, company or business would pay by 15,000 across the year. However, for companies which are within a group or who are connected to each other through common control, the 15,000 allowance has to be shared amongst the companies. The operation of the Apprenticeship Levy allowance means that only employer companies or groups, or connected companies, with an annual pay bill of more than 3 million will pay the levy. It is possible to connect your group companies once you have set up on the system to manage your apprenticeships. This is illustrated in the following two diagrams: Source: gov.uk

7 GROUPS AND CONNECTED COMPANIES Source: gov.uk

8 GROUPS AND CONNECTED COMPANIES ACCURATE ALLOCATION OF THE ALLOWANCE CAN REDUCE THE COST OF THE LEVY Where a group has an annual pay bill of more than 3m, an accurate allocation of the Apprenticeship Levy allowance can assist the group to manage their Levy costs. The group can determine the optimal allocation of the Apprenticeship Levy allowance within the group. This opportunity to reduce the cost of the Levy arises due to the facility to allocate unused Apprenticeship Levy allowance within the group. ALLOCATING THE APPRENTICESHIP LEVY WITHIN GROUPS Within a group (or between connected companies) the Apprenticeship Levy allowance of 15,000 can be allocated between: The group PAYE schemes The connected companies The group can decide how to split the allowance between PAYE schemes or between connected companies. You should ensure all PAYE schemes are added to your account to enable this. This is illustrated here: The group needs to report how they have chosen to allocated their allowance the first time they choose to pay Apprenticeship Levy. A group can only decide how they allocate the group s levy allowance across their connected companies at the start of the next tax year. It is not possible to change a company s share of the allowance during the tax year or to change the allocation within a group. The group companies must continue to apply the Levy allowance that was allocated at the beginning of the tax year even if, part way through the year: Source: gov.uk

9 GROUPS AND CONNECTED COMPANIES The company became a connected employer (such as by merging with or acquiring another company); or The structure of the group of connected companies changes (such as by demerging with another company) This means that where a group acquires or disposes of a company during the tax year, the acquisition does not affect the group allocation. It also means that the allowance available to an acquired or disposed company is fixed at the beginning of the tax year. EXAMPLE OF ALLOCATING THE APPRENTICESHIP LEVY ALLOWANCE WITHIN GROUPS The following illustration shows how a group can pay more than the expected amount of Apprenticeship Levy if unused amounts of the allowance are not reallocated. Equal allocation Co A Co B Company Co C Co D Co E Pay Bill Pay 0.5% Allowance allocated evenly Levy payable Levy allowance not used Expected levy cost Actual levy cost Levy allowance not used 4,000,000 1,000, , , ,000 6,250,000 20,000 5,000 1,500 3,750 1,000 31,250 3,000 3,000 3,000 3,000 3,000 3,000 17,000 2, ,750 1,500 2,000 3,500 16,250 19,750 3,500 By comparison, with an accurate allocation of unused allowance, the Apprenticeship Levy allowance can be used in full to ensure that the cost of the Levy is limited to the group s actual total annual pay bill. Accurate allocation Co A Co B Company Co C Co D Co E Pay Bill Pay 0.5% Allowance allocated Levy payable Levy allowance not used Expected levy cost Actual levy cost Levy allowance not used 4,000,000 1,000, , , ,000 6,250,000 20,000 5,000 1,500 3,750 1,000 31,250 3,750 5,000 1,500 3,750 1,000 15,000 16,250 16,250 nil 16,250 16,250 nil

10 REPORTING AND PAYING THE APPRENTICESHIP LEVY CALCULATING AND REPORTING THE APPRENTICESHIP LEVY Apprenticeship Levy is charged at 0.5% of a group company s annual pay bill. For the first month of the tax year the group company should: 1. Divide the group company s allocation of the Apprenticeship Levy allowance by Subtract this figure from 0.5% of the company s monthly pay bill. For each of the following months: 1. Calculate the company s total pay bill for the year to date. 2. Add up the company s monthly levy allowances for the year to date. 3. Subtract the company s levy allowance for the year to date from 0.5% of the company s total pay bill for the year to date. 4. Subtract the amount of the levy already paid in the year to date. Any unused Apprenticeship Levy allowance due to the company can be carried forward into the next month within the same tax year. The Levy is reported to HMRC monthly by employers via their payroll tax reporting on their Employer Payment Summary ( EPS ). We have been advised by a leading payroll software supplier that, whilst the software will calculate the levy due each month, in practice group companies will have to implement the following steps to ensure their allocation of the Apprenticeship Levy allowance is correctly administered: 1. Set their individual allocation of the Apprenticeship Levy allowance to the desired amount (ie between 0 and 15,000 depending on the group allocation) in the software at the beginning of the tax year; and 2. Retain that allocation for the tax year as a whole; and 3. Make any subsequent change to the allocation at the beginning of the following tax year. OPERATING THE PAYMENT OF PROVIDERS FROM YOUR ACCOUNT The Skills Funding Agency have issued guidance here:

11 PAYMENT FOR TRAINING FUNDING APPRENTICESHIP TRAINING TO UTILISE YOUR LEVY The search functions that you can access once logged in are illustrated here: Source: gov.uk

12 REGISTERING APPRENTICES REGISTERING THE LEARNER WHEN THE APPRENTICESHIP IS TO START In the new service, employer and provider both need to enter and agree on the following data, which is then used to match Individual Learning Record details to those held separately by the employer: 1 Unique learner number 2 Price 3 Apprenticeship course / details 4 Start date - a qualifying learner can't start before the agreed date 5 Training provider