Are you prepared for the Apprenticeship Levy?

02 Feb 2017



As the Government launches its industrial strategy, it’s time for the recruitment industry to prepare for the introduction of the new Apprenticeship Levy. At the latest REC IRP Apprenticeship Levy workshops, it was agreed that training talent is key, with Middleton Murray and the Skills Funding Agency highlighting that this is a new way to consider training budgets.

Kate Shoesmith gives an overview of how the levy will affect your business, and how to get ready for its April 2017 launch.

The key facts

The Apprenticeship Levy is a 0.5% tax on all businesses with an annual payroll of over £3 million, including contingent labour payrolls for agency and contracted staff (all workers subject to class 1 secondary National Insurance Contributions). Apprentices will be expected to participate in off-the-job training for 20% of the time. The levy has a £15,000 per annum allowance, meaning companies with a payroll less than £3 million will not be liable for the levy (though the levy and allowance are calculated on a cumulative basis so recruiters could find that they have to pay some months and not others and then get a credit from HMRC). From 2018 companies eligible to pay the Apprenticeship Levy will be able to transfer 10% of the tax to those in their supply chain. The levy Digital Account Service will run in England, but there will be different schemes for drawing back levy funds in Scotland, Wales and Northern Ireland. We are currently talking to devolved Governments about how this will operate.


An opportunity to train your talentEnhancing your talent is key to keeping you ahead in a competitive industry like recruitment, and while the levy may bring some financial challenges, it also offers a chance to improve the strength of your workforce through dedicated professional training.

We know the levy is inherently unfair to recruiters. A quality apprenticeship must last 52 weeks or more.  Agency workers traditionally are on an assignment for far less time. We continue to make this point to government and you should to your contacts too – talking to your clients early before this new tax hits is important.

The key is making sure training works for you. The earlier you identify areas for development and look into training providers the easier you’ll turn this initiative into an advantage for your company. Read our factsheet for more guidance.

Tailor training to work for youGetting the most out of your training through tailoring what you offer will ensure that the Apprenticeship Levy works for you. Training providers are verified, audited and inspected by Ofsted, but you’ll need to do your research to make sure training suits your business goals.

Apprenticeships may be new to your business, so make sure speak to training providers in detail about your needs, workforce, aims for training and what the provider can offer.  This is your chance to invest in staff, so make sure you’re getting the most valuable training.

Digital Account Service, funding and payroll

The government website contains all the information and advice you need to get up to speed with the legal aspects of the Apprenticeship Levy, including information on the Digital Account Service, how funding works, and what to do if you don’t have enough funds in your digital account to pay for your chosen apprenticeship.

It’s important you understand exactly how the Apprenticeship Levy works, so take the time to read through available information on the government website. The REC Legal team have also distilled this down for you.

Moving workers off payroll to avoid the levy needs to be carefully weighed against the changes to IR35 in the public sector coming into effect in April 2017. Read more about this in our autumn statement and in our online legal guide.

Access support

While this may all seem daunting, there is support out there. For companies with a payroll in excess of £60 million the Skills Funding Agency can provide an account manager to help manage this new change. Contact us for advice on who to speak to at the SFA, or for any other advice on the Levy.

If you would like to receive more information about the Apprenticeship Levy, please contact our Headof Policy – Kate Shoesmith.

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