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Apprenticeship Levy – How it works

What is the Apprenticeship Levy? In layman’s terms, the Apprenticeships Levy is a Government initiative announced in the 2015 Summer Budget. The Government proposed to apply the Levy to large employers across all industries. The initial announcement raised concerns by some employers and asked the question of how big businesses will be hit by this new tax to help fund the training of 3 million apprentices by 2020.

The aim of the Apprentice Levy is to help develop the UK’s skills base and drive long-term productivity in both the private and public sectors. Funds raised by the levy would provide apprenticeship employers with an electronic voucher that could be used to purchase training from recognised providers. Chancellor George Osborne previously said that while many companies work hard to ensure their staff gets good training, the country had to “confront the truth… that too many large companies leave the work to others and take a free ride on the system”.

In spring 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 Government aims to introduce the apprenticeship levy on 6 April 2017.

This will affect all companies despite their size. Those with annual wage bills over £3 million must contribute and should now be planning to get the best value they can from this investment.

The landscape is also changing for SMEs. They will only have to contribute 10% – and can therefore make use of a 90% funded apprenticeship programme. In addition, companies with under 50 employees will have 100% of their costs covered when employing 16-18 year olds.

Click here to view the latest guidance on how the Levy will work and further information from the Government. The guidance is relevant for all employers operating in the UK, whether they will pay the apprenticeship levy or not.

Key updates:

  1. Funds will be accessed through a new digital apprenticeship service account and will appear in your account monthly, which will be available for registration in January 2017. The first funds collected in April 2017 and available to spend in May 2017.
  2. Funds will expire 18 months after they enter your digital account if you don’t spend them on apprenticeship training.
  3. Government will work with the devolved administrations to make the levy work for employers that have operations across the UK, and will publish more details in June 2016.
  4. Government will apply a 10% top-up to the funds you have for spending on apprenticeship training in England.
  5. Once you have agreed a price with a provider, all payments to the provider will be made monthly for the first year of the Levy.
  6. Employers can use the digital apprenticeship service whether they pay the levy or not to help them choose training providers, assessment organisations and post vacancies.

If you would like to know more about how you can maximise your return from the Levy, get in touch with Nucleus today.