If so, the proposed employment apprenticeship levy will affect you.
We have been contacted by
some of our clients who are
concerned about the financial
impact on their organisation of
the apprenticeship levy which is
due to come into effect in April
2017.
Background
The Government announced in its July 2015
budget that it would be introducing a levy on
large employers to help fund 3 million new
apprenticeships during the current Parliament.
The levy will support all post-16 apprenticeships
in England, and will provide funding that each
employer can use to meet their individual needs.
The scheme
The basic rules are that it will be introduced
from 6 April 2017 and will be accounted for
via the PAYE system. The rate of 0.5% will be
applied to an employer’s pay bill and the first
£15,000 of liability will be exempt, meaning
that employers would need a pay bill that
exceeds £3million before they have to pay any
levy. The pay bill is the amount of earnings
subject to class 1 NIC, therefore benefits in kind
are excluded from the levy.
Connected employers, such as a group of
companies or MAT’s, will only receive one
exemption.
Who is in scope?
Whilst all organisations whose wage bill exceeds
£3 million will be in scope, public bodies that
employ at least 250 people will be set targets
by the Secretary of State for the number of
apprentices they are expected to employ.
This will be set at 2.3% based on headcount,
meaning a school with a head count of 450 will
be expected to start at least 10 apprentices per
year in proper accredited posts. That will cause
difficulties for a number of schools.
Schools that are maintained by a local authority
are expected to be included in their own local
government target and will be caught by
the requirement. Other schools such as free
schools, foundation schools, voluntary-aided
and academies or trusts with 250 or more
headcount will be covered by the duty.
There is scope for smaller bodies to be included
if they are part of a group (which can be
determined by the Secretary of State).
Rationale
The Government believes that if businesses
invest in apprenticeships then it is likely that
they will save more than the levy.
Don’t forget that from April 2016 employer NIC
(13.8%) will not be charged on Apprenticeship’s
earnings when they are under 25 years of age.
However, tax experts do not think that the
savings will exceed the levy unless a significant
number of workers are apprentices. The levy is
a new tax but should probably be viewed as an
additional charge to employers NIC although
the Government can’t simply do this as they
have committed to not increasing NIC.
What should schools and MAT’s do now?
This is going to be problematic for many large
schools and MAT’s. Our clients are already
concerned that the additional financial burdens
will dissuade schools from joining a MAT.
These costs should be included in the forward
projections of school and college finances.
Where can I find the rules?
The draft legislation was published last week
and copies of it and guidance can be found
at www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work.
The Government has launched another
consultation and is seeking views on which
public bodies in England should be set targets
on the number of apprenticeships working
for them and can be found at www.gov.uk/government/consultations/public-sector-apprenticeship-targets.
The consultation ends on 4 March 2016.