The new apprenticeship levy on firms with a payroll bill of £3m or more will come into effect on 6 April 2017 and will be collected through the PAYE system along with tax and National Insurance Contributions (NICs).
Technically the levy, which is set at 0.5 per cent of the employer’s pay bill, will be applicable to all employers. However, it only applies in practice to those whose annual wage bill is greater than £3m because an annual allowance of £15,000 is available to all employers (0.5 per cent of £3m).
In addition, each company in a group of two or more “connected” companies must pay the levy if it meets the pay bill criteria but only one £15,000 allowance will apply.
Although the AL is an annual charge, employers must report it via PAYE Real Time Information (RTI) and pay it each tax month as they do other PAYE liabilities. The pay bill is the amount on which secondary Class 1 NICs are calculated. The monthly calculation of AL is based on the employer’s total pay bill for the tax month, which may include weekly as well as monthly pay runs.
Once the AL comes into effect, employers will be able to login to an online portal, where they can access training providers and assessment organisations and use their Digital Apprenticeship Service (DAS) account to fund training.
In the DAS, employers can use their vouchers up to the value of £15,000 or the value of their company’s contribution to the levy, if they pay it, whichever is the greater. However, they cannot use this allowance to pay apprentices’ wages or cover their travel costs.
HM Revenue & Customs (HMRC) has published a manual explaining the AL but this is rather long and quite complicated, therefore employers would be advised to contact their professional advisors for more information.