The way the government funds apprenticeships in England is changing from 6 April 2017.
Some employers will be required to pay the new apprenticeship levy, and there will be changes to the funding of apprenticeship training for all employers.
The levy requires all employers operating in the UK, with a pay bill over £3 million each year, to invest in apprenticeships.The levy will be 0.5% of an employer's pay bill subject to secondary Class 1 NICs and each employer will receive an annual allowance of £15,000 to offset against their levy liability. This means that, subject to the connected companies and charities rules, only employers with annual pay bills greater than £3 million will be required to report and pay any levy.
All guidance relating to calculating and paying the apprenticeship levy is subject to Parliamentary approval of the legislation in the 2016 Finance Bill. Further guidance for employers relating to calculating and paying the levy will be available later in the year.
Employers will only need to report the apprenticeship levy to HMRC where they are likely to have a liability to pay the apprenticeship levy. The levy will be payable through Pay As You Earn, alongside income tax and National Insurance contributions (NICs), and reported on the Employer Payment Summary (EPS). To keep the process as simple as possible, an employer's 'pay bill' will be based on the total employee earnings subject to Class 1 secondary NICs, including all earnings below the Secondary Threshold.
Levy paying employers in England will receive funds in a new digital apprenticeship service account, which can then be used to pay for apprenticeships. Once the employer has negotiated and agreed a price with the training provider they have chosen, they can use the money in their digital account to pay for training and assessment for apprentices. Apprenticeships and apprenticeship funding are the responsibility of the Skills Funding Agency (SFA) and the Department for Education (DfE) (this follows the recent announcement that responsibility for apprenticeships has now moved).
As apprenticeships are a devolved policy, authorities in each of the UK nations manage their own apprenticeship programmes. This means that the digital apprenticeship service will support the English apprenticeship system. Scotland, Wales, and Northern Ireland have their own arrangements for supporting employers to access apprenticeships.
If an employer is not liable to pay the levy, they will still get a government contribution to the training and assessment of their apprentices. They can also use the digital apprenticeship system to find a provider which offers the training they would like their apprentices to receive.
From next year, employers will be able to use the new online service which will help businesses to search for apprenticeship training and recruit an apprentice, as well as providing access to levy funds. More online tools will be available to levy paying employers as part of the digital apprenticeship service over the next year. By 2020, all employers will be able to use the digital apprenticeship service to select and pay for training and assessment for apprenticeships.
Apprentices who have been accepted on to an apprenticeship programme before 6 April 2017 will be funded for the full duration of the apprenticeship under the terms and conditions that were in place at the time the apprenticeship started.
The National Apprenticeship Service supports employers to recruit apprentices and can help with levy queries. For more information on this as well as the benefits of employing apprentices and how to set up a programme, email email@example.com or call (free phone) 08000 150 600.