The Apprenticeship Levy

Posted in : Back to Basics on 7 April 2017
Jill Gracey
A&L Goodbody
Issues covered:

Jill Gracey from A&L Goodbody discusses the Apprenticeship Levy which came into force on 6th April 2017.


Today I'm going to talk about the Apprenticeship Levy and where we stand with the implementation of the Apprenticeship Levy as at February 2017. The Apprenticeship Levy was announced by the Chancellor in the summer of 2015 budget statement. It was a response to an apparent reduction in the rate at which employers invest in the training of their staff.

The implementation of an apprenticeship levy aims to increase productivity and reduce youth unemployment through the expansion of apprenticeships. The apprenticeship levy is due to come into force on 6th April 2017.

How the levy works

Well, the rate of the levy will be 0.5% of an employer's pay bill for a tax year less an annual allowance of £15,000. This annual allowance of £15,000 actually means that it will only be employers whose pay bill exceeds £3 million over a tax year that will be the net contributors to the levy funds, as 0.5% of £3 million or less will be covered by that £15,000 annual allowance.

While employers with a pay bill of £3 million per annum or less will not contribute to the levy funds, they will still have access to the schemes and training for apprenticeships which are intended to be funded through the apprenticeship levy.

The levy will be payable alongside income tax and National Insurance through pay as you earn or PAYE before being distributed to each of the devolved jurisdictions in accordance with the Barnett formula. The levy applies to both public and private sector employers regardless of whether they employ apprentices or not.

An employer whose pay bill exceeded £3 million in the tax year preceding the implementation of the levy, or whose pay bill is expected to exceed £3 million in a tax year commencing on or after 6th April 2017, must notify HMRC of the amount of the liability to the levy. Additionally, if an employer's annual pay bill unexpectedly increases to more than £3 million this should also be reported to HMRC as soon as possible.

How will it operate in Northern Ireland?

Well, as apprenticeships and skills policy is a devolved matter, each jurisdiction within the UK will manage their own apprenticeship programme and how the funding is to be spent on apprentice training.

The Department for the Economy conducted a consultation to gauge the views of interested parties including employers and training providers with a view to shaping the Department's policy on how employers might be supported for apprenticeships and wider skills development in Northern Ireland.

While that consultation has now closed, at today's date no formal consultation response from the Department has been published. However, the Department is in the process of implementing major reforms of Northern Ireland's education and training which builds on the existing model of training available under, for example, the Apprenticeship’s NI scheme, whilst aiming to move towards a more employer-led system. Employers in Northern Ireland are still awaiting details of what systems will be put in place for accessing levy funds. If you would like further information or if you would like to be updated on the current position, please do not hesitate to contact us.

This article is correct at 07/04/2017

The information in this article is provided as part of Legal-Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article.

Jill Gracey
A&L Goodbody

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