Newsflash: Apprenticeship levy

What do we already know?

We updated you on the Apprenticeship Levy in our February 2016 Newsletter Government reforms (3): Apprenticeships and on the Government’s guidance on this Levy in our April 2016 Newsflash ACAS & Government guidance on apprenticeships & the levy.

We further updated you in our August 2016 Newsletter Government Reforms (1): Apprenticeships that the Government confirmed that employers with an annual wage bill in excess of £3m will be required to pay in 0.5% of their annual wage bill into a digital account which the employer can access for the purpose of funding apprenticeships.  Also that the Department for Education (which now has responsibility for the Government’s skills and apprenticeship policy) published new guidance on the revised apprenticeship system including:

• updated guidance on how the Apprenticeship Levy will work (available here); and
• proposals of how employers in England might access Levy funding (available here).

What’s new?

HMRC has published the first set of draft regulations for the calculation, payment and recovery of the Apprenticeship Levy, for a period of technical consultation.  The consultation is available here and HMRC is seeking views from employers who are likely to have a liability to pay the Levy.

The draft regulations state that employers with a pay bill of £2.8m or less for the previous tax year or who believe their pay bill will be less than £3m in the current year will not have to engage with the Apprenticeship Levy. Employers must assess their annual pay bill amount for the previous and current tax year to decide if they are liable for the Levy; and make provision for the due date of the Apprenticeship Levy to be by the 19th (or 22nd if they report electronically) of the following month. The monthly pay bill is defined as the total amount of earnings that would be liable to National Insurance, ignoring the secondary NI threshold.  Employers are required to notify HMRC of the Levy which is to be paid.

The Apprenticeship Levy will be reported through the PAYE process. The draft regulations confirm that the annual Levy allowance will operate on a monthly cumulative basis, so the Levy allowance will increase evenly throughout the year.   An employer with more than one PAYE reference has to elect to apportion the Levy allowance between the references and to advise HMRC of the election made as part of the employer’s first Apprenticeship Levy return for the tax year. The regulations also make provision for recovery of any overpaid Levy by the employer.

The regulations set out how to calculate the monthly Levy allowance on a cumulative basis, in order to calculate Levy liability – they also set out how to calculate Levy liability both in the first month of the tax year, and in subsequent months.

HMRC says the intention is later in 2016 to make the full package of draft Apprenticeship Levy regulations available, which will cover other aspects such as assessment, repayment, recovery from third parties, and details of the records to be retained.

The consultation closes on 14 November 2016.