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The Apprenticeship Levy: May 17th

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The most updated information about the apprenticeship levy. Including how it works, who it applies to, and how SME's will be affected by it.

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The Apprenticeship Levy: May 17th

  1. 1. As a valued client of The Pathway Group, we want to keep you informed of changes within the apprenticeship sector. 2017 sees some of the largest changes to the way apprenticeships are funded, designed and delivered and we are here to guide you through these changes. The Apprenticeship Levy The Apprenticeship Levy came effect in April 2017 and is a payroll tax collected by HMRC through the PAYE system. The purpose of the Apprenticeship Levy is to help fund and increase in apprenticeship numbers, and build an experienced workforce for the future. Who pays the levy? The Levy applies to both public and private sector employers across all sectors with a paybill in excess of £3m per annum which works out at approximately 2% of employers in the UK. These larger business' will need to pay the levy whether they reclaim these funds to pay for apprenticeship training or not. Every business who pays the Apprenticeship Levy will be entitled to an annual allowance of £15,000 to offset against their payment. Non-levy paying employers will have to make a cash contribution towards the cost of an apprenticeship. This contribution equates to 10% of the
  2. 2. overall cost of the apprenticeship. The remaining 90% will be funded by HM Govt. How will the Levy be paid? The first Apprenticeship Levy instalment was made in April 2017, and applied at a rate of 0.5% of the annual paybill. This will then be collected monthly by HMRC through PAYE systems. Below are some examples of how the levy is applied. Example 1. Employer of 250 employees, each with a gross salary of £20,000 Paybill: 250 X £20,000 = £5,000,000 Gross levy: 0.5% X £5,000,000 = £25,000 Allowance: £25,000 - £15,000 = £10,000 Levy Due: £10,000 Example 2. Employer of 100 employees, each with a gross salary of £20,000 Paybill: 100 X £20,000 = £2,000,000 Gross levy: 0.5% X £2,000,000 = £10,000 Allowance: £10,000 - £15,000 = £0 Levy Due: £0 How does it work? HM Govt. have created the Apprenticeship Service - an online platform which employers will have access to purchase Apprenticeship Training using funds provided by their levy payments. Non-levy paying employees are not required to use this system until 2018. Instead, payments will be made directly to the Apprenticeship Provider, such as Pathway Group, who will then draw the remaining 90% from HM Govt.
  3. 3. How does this affect smaller businesses? Most companies, in particular SME's, will not be in the scope to pay the Apprenticeship Levy. However, these businesses will have to make a cash contribution of 10% of the value of the Apprenticeship. HM Govt. will 'co-invest' the remaining 90%. The cash contribution of 10% made by employers can be made in instalments over the duration of the apprenticeship programme. Smaller businesses with less than 50 employees who take on an apprentice aged between 16-18 will have 100% of the cost of the Apprenticeship covered by HM Govt. In addition, the business will receive a cash incentive of £1,000. What is the cost of an apprenticeship? The prices for Pathway Group apprenticeship programmes* range between £1,500 and £2,500 depending on the programme and level. When does this take effect? The Apprenticeship Levy changes are now live and apply to all new apprenticeships. * prices quoted are subject to change and relate to Apprenticeship Framework programmes only and are exclusive of VAT at the current UK rate.