The Government has this morning published more details about how its apprenticeship levy will work. It had already been announced that firms with payroll of £3m and over would have to pay an additional 0.5% to the levy.
The details released this morning show that the levy will apply to all firms but that the first £15,000 (0.5% x 3,000,000) will be a tax allowance. A company with a £5m payroll would have to pay £10,000 a year to the apprenticeship levy through Her Majesty’s Revenue and Customs. The levy takes effect from April next year.
Larger companies had expressed concerns that the levy would be just a tax on payroll. But this morning the Government said that any apprenticeship levy payment to HMRC will be allowable for Corporation Tax. Firms that already contribute to sector industry training board schemes will not be able to offset the levy against current contributions. Once a company has declared the levy to HMRC it will be able to access funding for apprenticeships through a new digital apprenticeship service account. This funding will pay for training and assessment for apprentices in England.
Companies can register with the Government’s digital apprenticeship service from January 2017 and the first payments to employers will be made in May 2017. Government funding of apprenticeships will now cover 90% of the training cost for companies with payroll below £3m and not, therefore, contributing to the levy. It had been only two-thirds of the cost previously. The Government has set a target of having three million young people in apprenticeships by 2020. In the 2014/15 academic year there were 499,900 apprenticeship starts.
East Midlands Chamber* is a huge advocate of apprenticeships. It currently manages about 250 apprenticeships and has 60 vacancies on its books across a range of sectors. Sarah Temperton, the Chamber’s Head of Chamber Training, said: “Apprenticeships are a great way of equipping young people with the skills, attitudes and attributes they need to have long and successful careers. Our own apprenticeship programme has a progression rate of 99% of people staying in a permanent job at the end of their training.
“The appetite for apprenticeships is not diminishing. Government has set a target of three million apprenticeships before 2020 but in order to achieve this, it’s vital that a true parity of esteem exists between vocational routes into employment and academic routes to ensure that young people are being properly advised on their full range of options. “It’s also vital that employers of all sizes fully understand the way apprenticeships work, from funding through to training provision, so that smaller firms in particular are not deterred from taking on apprentices.”