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Apprenticeship Levy: How will the levy work?

04/07/2016 Sophie

In order to meet its goal of increasing apprenticeship starts to three million by 2020, the government will impose a levy of 0.5 per cent on all employers with a UK PAYE in excess of £3 million per annum from 5th April 2017.

On previous blogs, we have looked at the reasons for the levy and its potential influence on your business. But with this latest post, we are going to explore how the levy will work on a timeline from now until full implementation.

How the levy will work

· For employers:
HMRC collect levy (PAYE) > employer online account > employ apprentices > pay for training with “vouchers” > receive training for apprentice > unused vouchers expire after 18 months

· For training providers:
Registered with SFA (Ofsted) > offer apprenticeship training > receive vouchers (digital services) > providing training to apprentice > redeem vouchers

· For the government:
Pass data on levy payments from HMRC to BIS, give employers and providers indemnity assurance > timely data on
training > check training is complete > if funding is unlocked then pay provided

Summer 2016

According to private university BPP, this summer we can expect announcements on:

· Provisional funding bands - The maximum level of funding available for each apprenticeship from April 2017
· Provisional level of government support - The level that will be available towards the cost of apprenticeship training if you aren’t a levy paying employer from April 2017
· Provisional level of extra payment - This is what you can get for hiring 16 to 18 year old apprentices from April
· Provisional amount for training - With specific reference to English and Maths apprentices who need it from April 2017
· Eligibility rules - Details about who employers are able to spend apprentice funding on and where

Autumn 2016

In the autumn, employers should be given more details about how the levy will actually operate, with information about
final levels of funding, government support, 16 to 18 payments, as well as English and Maths payments for apprentices starting from April 2017.

The government will also create full, draft funding and eligibility rules. Based on current funding rules, the levy can be
claimed back and spent on apprenticeship training for all employees at all levels and ages. It may also be used to fund existing employee development as long as it meets the criteria set out.

By the end of 2016

The BPP says that this will be a transition period, with information still being provided about final, detailed funding and eligibility rules as well as further employer guidance from HMRC on how to calculate and pay the apprenticeship levy.

The government has made it clear that the HMRC will work closely with employers and providers of payroll services to
minimise the burden of implementing changes relating to the apprenticeship levy.

By April 2017

As soon as the 5th April 2017 rolls around, the Digital Apprenticeship Service (DAS) should be fully operational, which
will support the English apprenticeship system. Scotland, Wales, and Northern Ireland will have their own arrangements for supporting employers to access apprenticeships.

Also at this time, the new funding model goes live and the Institute for Apprenticeships will be in place. This will be
led by employers and support the work of the BIS (Department for Business, Innovation and Skills) and DfE (Department for Education) in setting funding caps on the level of government funding available for each apprenticeship standard. New ITB levy orders will also come into effect.