Government reforms (3): Apprenticeships

1. Apprenticeship Levy:

What do we already know?

In our November 2015 Newsletter Government reforms (3): Apprenticeships levy we updated you that the Government had published its response to its Consultation on the Apprenticeships Levy and that the Levy will be set at a rate of 0.5% of an employer’s paybill, to the extent that it exceeds £3million.

The levy is effectively a new tax which will be available to employers to fund apprenticeships and will be payable by all employers (companies, charities etc), in all sectors, across the whole UK.

What’s new?

HMRC has published the draft legislation, available here, which introduces the proposed new apprenticeship levy. Comments are invited by 2 March 2016.

The levy is to have effect from 6 April 2017.

The legislation confirms that the levy will be set at 0.5% of an employer’s paybill. However, all employers will then receive an annual allowance of £15,000 to set-off against the levy. In effect this makes the levy payable only to the extent that the employer’s paybill exceeds £3 million per year. This means that fewer than 2% of employers will pay any levy at all (although leaving those few employers to subsidise the many!).

To keep the process as simple as possible ‘paybill’ will be based on total employee earnings subject to Class 1 secondary NICs but not including benefits in kind. The policy intention is that employers will calculate and pay the levy on a monthly basis.

Funding for training will be accessible to all employers in England via the Digital Apprenticeships Service. Employers who pay the levy will be able to access more funding than they have put in, through Government top-ups. However, any levy funding which is not used within two years will expire, making it available for other employers.

Where two or more companies are connected with one another, only one company will be entitled to the annual allowance to be offset against the apprenticeship levy. Therefore large groups may be paying out more than they can recover, impacting on cost and growth.

2. Government’s apprenticeships target to be questioned

What do we already know?

We updated you in our September 2015 Newsflash Apprenticeships levy that the new Apprenticeships Levy would be applied to fund 3 million new apprenticeships during the current Parliament, by 2020. For further detail on the Levy see above.

What’s new?

An inquiry has been launched by the Business Innovation and Skills Select Committee into the target of 3 million apprentices by 2020 following concerns over how the Government intends to achieve its aims. The sub-committee will look at how the Government proposes to achieve this target and how it may affect industries with a skills shortage.

The committee is calling for written evidence with a deadline of 18 March 2016.

3. Public sector apprenticeship targets

The Government has published a consultation, available here, on public sector apprenticeship targets. The consultation seeks views on the Government proposals that public bodies that have 250 or more employees in England will have a duty to have a minimum of 2.3% apprenticeship starts each year.

The consultation also sets out the information the public bodies will need to publish and provide to the Government each year on the progress they have made towards meeting the target.

The consultation closes on 4 March 2016.