The Levy & Apprenticeships

If you have any questions about the Levy or Apprenticeships please contact Prostart and ask for the Recruitment Team on 0115 9468182.

In April 2017 the way the government funds apprenticeships in England is changing. Some employers will be required to contribute to a new apprenticeship levy, and there will be changes to the funding for apprenticeship training for all employers.

The apprenticeship levy requires all employers operating in the UK, with a pay bill over £3 million each year, to make an investment in apprenticeships. Employers can benefit from this investment by training apprentices.

For the purposes of the levy, an ‘employer’ is someone who is a secondary contributor, with liability to pay Class 1 secondary National Insurance Contributions (NICs) for their employees.

You will have a levy allowance of £15,000 per year to offset against the levy you must pay. This means you will only pay the levy if your pay bill exceeds £3 million in a given year.

Employers will pay the levy to HM Revenue and Customs (HMRC) through the Pay as You Earn (PAYE) process.

Examples of what you will pay

 Example 1: an employer who would pay the levy

An employer with an annual pay bill of £5,000,000:

  • levy sum: 0.5% x £5,000,000 = £25,000
  • subtracting levy allowance: £25,000 – £15,000 = £10,000 annual levy payment

Example 2: an employer who would not have to pay the levy

An employer with an annual pay bill of £2,000,000:

  • levy sum: 0.5% x £2,000,000 = £10,000
  • subtracting levy allowance: £10,000 – £15,000 = £0 annual levy payment

How to pay the levy

If you have calculated that you will pay the apprenticeship levy, you will need to declare this and include it in your usual PAYE payment to HMRC by the 19th (or 22nd if you report electronically) of the following month.

Accessing money paid under the apprenticeship levy

Once you have paid the levy to HM Revenue and Customs (HMRC) you will be able to access funding for apprenticeships through a new digital apprenticeship service account.

You will be able to use this to pay for training and assessment for apprentices in England. The service will also help you find training providers to help you develop and deliver your apprenticeship programme.

Separate arrangements will be in place in Scotland, Wales and Northern Ireland.

 Creating an account to access your funds

Online tools for employers will be available via the digital apprenticeship service over the next year. You will be able to register to create your account from January 2017 and you’ll be able to familiarise yourself with the service.

Levy-paying employers will be able to use the service to pay for the training and assessment of apprentices from April 2017. When you’ve registered, you’ll need to verify your Pay as You Earn (PAYE) schemes and link them to your account. You will be able to use more than one account if you’d like to keep your schemes separate.

 When funds will appear in your digital account

You will be able to see funds appear in your digital account monthly, a few working days after you have confirmed your pay bill and levy contribution to HRMC for the previous month.

This means that the first time you will see any funds in your digital account will be late May 2017.

Top-ups to the funds in your digital account

The Government will apply a 10% top-up to the funds you have for spending on apprenticeship training in England. We will apply the top-up monthly, at the same time the funds enter your digital account.

That means for every £1 that enters your digital account to spend in England on apprenticeship training, you get £1.10.

Funds will expire 18 months after they enter your digital account unless you spend them on apprenticeship training. This will also apply to any top-ups in your digital account. For example, funds entering your account in September 2017 will expire in March 2019, unless you have spent them. Money is spent when it leaves your digital account as a payment to a training provider.

The account will work on a first-in, first-out basis, through either payment or expiry. Whenever a payment is taken from your digital account it will automatically use the funds that entered your account first. This will minimise the amount of expired funds.

This will happen automatically. Your digital account will let you know in good time when any funds are due to expire so that you can arrange to spend them if you wish.

Apprenticeship training started before April 2017 – all employers

Apprentices who have been accepted on to an apprenticeship programme before 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.

Digital apprenticeship service

Whether you pay the levy or not, the digital apprenticeship service will help you to:-

  • Select an apprenticeship framework or standard
  • Choose the training provider or providers you want to deliver the training
  • Choose an assessment organisation
  • Post apprenticeship vacancies

From April 2017, if you pay the levy you will also be able to:

  • See the funds you have available to spend in England
  • Set the price you’ve agreed with your training provider
  • Pay for apprenticeship training and assessment through the digital apprenticeship service

Using funds in your digital account to buy training – levy-paying employers

When you agree to buy apprenticeship training from a particular Training Provider and the Apprenticeship has started, monthly payments will be automatically taken from your digital account and sent to the provider. This spreads the cost over the lifetime of the apprenticeship.

When you buy apprenticeship training through the digital apprenticeship service you don’t need to have enough funds in your digital account to cover the entire cost of the training at the start. As payments are taken from the digital account monthly, you just need to have enough funds in your account to cover the monthly cost of each apprenticeship you have chosen. You will see funds entering your digital account each month as you pay the levy, and funds leaving the account regularly each month as you pay for training.

The system will ensure your payments reach the provider. In April 2017, these payments will be made monthly. In future, we aim to give you more flexibility over the way payments leave your digital account.

If you choose not to use your digital account to buy apprenticeship training you will need to buy it directly from a training provider, following the same process as employers who do not pay the levy – https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work/apprenticeship-levy-how-it-will-work#employers-who-do-not-pay-the-levy.

Buying training if you don’t have enough in your digital account – levy-paying employers

If you pay the levy, you may find that over the course of an apprenticeship the funds in your digital account aren’t enough to cover the full cost of the apprenticeship training and assessment you’d like to buy. When this happens, you will set a price with the training provider and the government will support to help you meet the additional costs. Support is available, up to the maximum amount of funding available for that apprenticeship.

You will be asked to make a contribution to the extra cost of training and to pay this directly to the provider. You will be able to spread this contribution over the lifetime of the apprenticeship. As both you and government make a payment, we call this ‘co-investment’.

Once you have decided to buy apprenticeship training through the digital apprenticeship service:

  • funds will be taken from your digital account each month to pay the training provider
  • the provider will work out if the amount paid from your digital account is less than 100% of the amount due that month
  • the provider will calculate how much more you have to pay (using the rate set for employer co-investment) and agree with you when you will pay this
  • we will pay the government share direct to the provider
  • we will ask the provider to confirm that you have made your contribution

What you can spend apprenticeship funding on – all employers

Funds in your digital account, and funding provided by the government through co-investment, can only be used towards the costs of apprenticeship training and end point assessment. This must be with an approved training provider and assessment organisation.

It can’t be used on other costs associated with your apprentices or wider training effort. For example wages, statutory licences to practise, travel and subsidiary costs, managerial costs, traineeships, work placement programmes or the costs of setting up an apprenticeship programme.

What counts as an apprenticeship?

There are rules governing what an apprenticeship is. The main ones are:

  • the apprentice must be employed in a real job; they may be an existing employee or a new hire
  • the apprentice must work towards achieving an approved apprenticeship standard -https://www.gov.uk/government/collections/apprenticeship-standards or apprenticeship framework -http://www.afo.sscalliance.org/frameworkslibrary/
  • the apprenticeship training must last at least 12 months
  • the apprentice must spend at least 20% of their time on off-the-job training, for further guidance on off the job training requirements please click here

Employing an apprentice is very simple. The National Apprenticeship Service can provide all the information you need to know in order to employ an apprentice -https://www.gov.uk/take-on-an-apprentice.

Employers that don’t pay the levy

If you do not pay the levy, you won’t need to use the digital apprenticeship service to pay for apprenticeship training and assessment until at least 2018. When we ask you to start using the digital apprenticeship service to pay for apprenticeship training, we will help you to prepare.

When the new funding system begins in April 2017, you can choose the training you’d like your apprentices to receive, an approved training provider and an assessment organisation using the registers available on the digital apprenticeship service. Help with this is available from the National Apprenticeship Service -https://www.gov.uk/take-on-an-apprentice.

When you select Prostart as your Training Provider we will arrange an appointment to come and discuss the costs with you.

We will ask you to make a contribution to the cost of this training and government will pay the rest, up to the maximum amount of funding available for that apprenticeship. You are required to pay this directly to Prostart and you will be able to spread it over the life time of the Apprenticeship, to a schedule you agree. As both you and the government make a payment, we call this ‘co-investment’.

If you have any questions about the Levy or Apprenticeships please contact Prostart and ask for the Recruitment Team on 0115 9468182.