Introduction and History
– The Apprenticeship Levy was announced by Chancellor of the Exchequer George Osborne in the July 2015 budget.
– It was incorporated into law by Part 6 of the Finance Act 2016.
– The levy came into effect at the start of the 2017/18 UK tax year on 6 April 2017.
– It was projected to raise £2.675 billion in its first year of operation.
Operation
– The Apprenticeship Levy is paid by employers with annual pay bills in excess of £3 million.
– The levy is payable at 0.5% of the total pay bill minus an annual levy allowance of £15,000.
– The levy is paid to HMRC through the PAYE process.
– Separate arrangements exist for the use of the levy in each of England, Scotland, Wales, and Northern Ireland.
– Apprenticeships are a devolved policy.
Use of funding in England
– The Department for Education is responsible for the use of the levy in England.
– Employers’ levy payments are held in a digital fund.
– A 10% government contribution is added to each monthly payment.
– Funds in the digital fund remain available for 24 months.
– Payment from the digital fund is made directly to training providers on a monthly basis.
Sharing of levy funds
– Initially, Levy-paying firms could only share 10% of their levy with other businesses.
– Firms could nominate one other company to receive their levy fund.
– From July 2018, firms could share their levy with as many firms as they wished.
– From April 2019, firms can share up to 25% of their levy with other businesses in their supply chain.
– This change was welcomed by businesses.
References
– HMRC, Chancellor George Osborne’s Summer Budget 2015 speech.
– Finance Act 2016, Part 6.
– Legislation.gov.uk, UK government.
– Information on Apprenticeship Levy (PDF), UK Department for Education.
– HMRC, Apprenticeship Levy – guidance for software developers. Source: https://en.wikipedia.org/wiki/Apprenticeship_levy
The Apprenticeship Levy is a UK tax on employers which is used to fund apprenticeship training.
Introduced at the start of the 2017/18 tax year, it is payable by all employers with an annual pay bill of more than £3 million, at a rate of 0.5% of their total pay bill. It is collected through the Pay as you Earn process alongside other employment taxes.
