27 January 2017

The Apprenticeship Levy remains relatively poorly publicised, and many employers are unaware of what it will mean for them. It is now a little over 2 months until the scheme starts.

The Levy is a payment made by employers to a central fund to support and pay for apprenticeships in the UK.

The Levy applies across the UK, and applies (technically) to all employers with effect from April 2017.  However, due to the operation of the rebate/allowance system, in practice the Levy only impacts on employers with an annual salary bill of more than £3 million. 

The rate is 0.5% of the employer’s annual salary bill, but with an allowance/credit of £15,000.  So, for example:

Employer has an annual wage bill of £6M.   0.5% of £6M is £30,000.  Less the £15,000 allowance = annual levy payment of £15,000. 

Employers with a salary bill of £3M or less will not need to make a payment. 

The administration of the scheme (but not the fundamental basis of payment) differs between different parts of the UK, so employers who operate in (say) Scotland and England, will have their levy payment split according to the proportions of Scottish and English staff, and administered by the 2 different authorities.  HMRC will collect the levy through monthly PAYE, and the Scottish Government will receive the appropriate sum through the block grant.  The figure received by Scotland for 2017-18 is expected to be around £220M. 

The Scottish government will use the levy income to support skills, training and employment, including expanding the Modern Apprenticeship programme.   A Workforce Development Fund is to be established from Autumn this year.  The Scottish Apprentice Advisory Board will provide input and ensure that employers’ views are considered. 

The Levy will apply to all employers who meet the criteria, there is no exemption for those who already fund their own apprenticeships.  Conversely, employers who do not pay the Levy (as the wage bill is not high enough) can still seek funding for apprenticeships in the usual way. 

HMRC will continue to publish details of exactly how the calculation will be carried out, and payment made, and it is expected that further details will be forthcoming as to how the money will be spent in Scotland.  Employers who will have to pay the Levy may want to review their training practices, and consider whether supported approved apprenticeships, with the benefit of external funding, would ensure that at least the employer sees some return for their payment.  

Contact: Douglas Strang Senior Associate dst@bto.co.uk T. 0141 221 8012