Apprenticeship levy FAQs

07/09/2016 - 16:46
Jill Whittaker, managing director of HIT Training, answers some of the most frequently asked questions by employers about the new Apprenticeship levy.

Since the announcement of the Apprenticeship levy, it has sparked many questions from the hospitality Industry about how it will be implemented and the impact it’s going to have on catering operators.

Who does the levy apply to and when will it start?
Jill Whittaker: The Apprenticeship levy is a payroll tax that will be applied to employers with an annual pay bill of over £3 million per tax year, to fund new apprenticeships. The levy is set at 0.5% of an employer’s pay bill and will be paid monthly though PAYE from April 2017. As the levy will be a monthly deduction, this means that in any month where the pay bill is over £250,000 these costs will be taken. However, if the amount in the full tax year is less than £3 million, any levy deductions will be reimbursed.

Who can I spend my digital vouchers with and what can I spend them on?
In England, levy payments will be recorded on the Digital Apprenticeship Service website, where each employer will have their own account. The funding that levy-paying employers will get from the government, to support training and apprenticeships, will be in direct proportion to the size of their wage bill in England. For example, if 80% of a company’s pay bill is in England, then it will only pay the levy on that 80%. Employers who pay the Levy and are committed to apprenticeship training will be able to get out more than they pay in through a 10% top up from the government. This will be paid on a monthly basis to employer’s digital accounts.

It is important to note that levy payments will expire after 18 months of being in a digital account, so the sooner employers become engaged with apprenticeships, the sooner they will be able to use the levy contributions. The levy vouchers can only be spent on apprenticeship training and assessment with an approved training and assessment provider. To ensure catering operators get the most out of their payments, we recommend working with a training provider now, so that the systems have been set up in advance of the levy coming into place. The training providers will then receive the levy funding from the government to deliver the agreed training and assessment for individual employers.

How will the government fund apprenticeships that start before the levy is introduced?
From 6 April 2017, all employers will have to pay for apprenticeships, either through the levy pay bill tax or through a co-investment cash contribution. Until 5 April 2017, they can still run ‘cash-free’ apprenticeship frameworks. This means that if an apprentice is enrolled before 5 April, then there is no cash contribution to make for the duration of their programme. To take advantage of this, it makes sense to sign up new or existing staff on to appropriate apprenticeship training programmes now.

My business has a pay bill of less than £3 million; how will I be funded?
There are two types of employer who will be required to contribute towards the cost of their apprenticeship training outside the Levy system: employers with a pay bill less than £3 million, and those who pay the Levy but have either used all their funds or have an insufficient amount to train the number of apprentices they have. These businesses will be required to co-invest a small proportion of funding towards the cost of apprenticeship training. The government will cover the majority of these costs and there will be more information released before the end of 2016 on the exact amount these employers will have to pay.

Employers not required to pay the levy will not be able to use the Digital Apprenticeship Service until 2018–19. However, from April there will be a requirement to co-invest and make a cash contribution towards the cost of any apprenticeship programme within an employer’s business. For this, a set price will be agreed and the costs of training and assessments will be paid directly to the training provider – allowing more time to prepare for the new system.

How will the levy work if my company is part of a group of connected companies or a joint venture?
If catering operators are part of a group or a connected company, then they will be able to collect their funds together into one account. As things currently stand, employers that are not connected will not be able to pool funds.

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