How changes to Government funding for apprenticeships could affect your business

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If you employ apprentices, are planning to, or have an annual wage bill in excess of £3million, recent legislation developments apply to you.

Put simply, from the 6th of April 2017, the Government is altering how it offers support to employers with apprentices.

An ‘apprenticeship levy’ (0.5 percent of an organisation’s pay bill) will be introduced – compulsory for those totalling higher than £3million.

The measure will apply to all businesses of this type, regardless of sector and even whether they employ apprentices of not.

This fee will automatically be deducted via PAYE, so if your business meets these criteria, your accounts department will need to be prepared.

Why has the apprenticeship levy been created?

The Government has stated its objective to create an additional 3million apprenticeships in England by 2020.

This is part of a wider strategy to boost productivity and raise the standards of vocational skills.

By placing a requirement to fund apprenticeships on such organisations, it aims to ‘support training by putting employers at the centre of the system’.

How much will I have to pay?

As stated, if your bill is over £3million annually, you’ll need to pay at a rate of 0.5 percent.

However, an allowance of £15,000 will be made available by HMRC for employers to offset against their required payment.

As an example, for a business with a £6million pay bill:

  • £6,000,000 x 0.5% = £30,000 (apprenticeship levy required)
  • £30,000 minus £15,000 allowance = £15,000 (actual payment due)

The allowance entitlement will be introduced at the same as the levy itself in April 2017.

Any apprenticeships that begin before May 2017 will not be affected by the changes and will continue to be funded as per agreed current terms.

Where can I find out more?

If your pay bill means you will be required to pay the levy or if you’re an employer with a vested interest in apprenticeships, we can help.

To discuss how the apprenticeship levy changes will affect you and your business, contact us to talk to one of our commercial law specialists.