What is the Apprenticeship Levy?

The apprenticeship levy is a form of taxation designed to help companies offer more apprenticeships. It was originally introduced to benefit businesses by boosting essential training and developing apprenticeship programmes. It is known as the levy.

The levy can be incredibly beneficial to businesses, boosting essential training and developing apprenticeship programmes as well as increasing employee engagement.

When was the apprenticeship levy start date?

The levy came into effect from 6th April 2017 having been proposed in the 2015 budget by the then-chancellor George Osborne. Any employer subject to the payroll threshold of more than £3 million would start paying their monthly levy from that date.

The levy was introduced as a government scheme to fund apprenticeships. Associated rules state that employers with a payroll of more than £3 million must pay a 0.5% levy on their total payroll, offset by a £15,000 government allowance. The levy is paid monthly through PAYE alongside income tax and national insurance contributions.

Levy contributions appear in a digital account which can be used by the employer to arrange and pay for apprenticeship training. The funds can only be spent on apprenticeship training or end-point assessment according to levy rules.

After 24 months any unused levy funds expire and return to the government.

Non-levy-paying employers can pay 5% of the apprenticeship course cost, with the government covering the remaining 95% through the process of ‘co-investment’.

Who can use the levy?

The levy can only be used within England, as apprenticeship legislation differs across the devolved nations. For this reason, apprentices funded by the levy must work at least 50% of their time within England. The amount of levy a business can access is directly linked to the proportion of their employees living in England.

Unlevied employers can use the levy through a transfer of funds from a levy-paying employer. Employers can transfer up to 25% of their annual levy fund to another business, for example, a company in its supply chain. This can be a great way to develop business relationships or give something back to the community.

How to use the levy

The levy funds sit in a digital ‘apprenticeship service’ account used by employers to fund apprenticeship training provision. The account is used to manage levy funding, track apprentices, find training providers, or transfer unused funds.

Any levy funds are topped up each month with a 10% government contribution. As levy funds expire after 24 months, it is vital to utilise your levy as soon as possible.

Once a programme and training provider has been selected and a price agreed, your provider will be paid out of your digital account every month. Levy rules state that it must only be used to pay for apprenticeship training and end-point assessment, and cannot be used to pay apprentice wages.

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Summary

The levy is a tax paid by employers:

• It applies to those with a payroll of more than £3 million
• It is used to fund apprenticeship training
• Levy is charged at 0.5% of an employer’s total payroll, collected monthly through PAYE
• After 24 months, unused levy funds expire and return to the government

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