The government reported in June that employers lost access to £11 million of their Apprenticeship Levy funds in May, which was the first sun-setting period for the policy. This amounts to 8 per cent of the £135 million paid in May 2017, which is lower than the previously predicted £120 million.
Despite the over-estimation, it reveals that while many businesses across the UK are reaping the benefits that apprenticeships can bring to the workplace, there are still thousands that are missing out on the opportunity. In this blog, the PRS team explores everything that you need to know about the Levy.
What is it?
The Apprenticeship Levy is a compulsory tax paid by businesses whose annual pay bills are in excess of £3 million, with the Levy set at 0.5 per cent of the annual pay bill.
Why Was It Introduced?
The aim of the Levy is to introduce new talent into organisations and increase overall employability across the UK workforce. The government set out to develop vocational skills and improve the quantity and quality of apprenticeships. Despite a commitment to an additional 3 million apprenticeship starts in England by 2020, the number of people starting an apprenticeship since the Levy was introduced in 2017 has plummeted. There were only 285,000 apprenticeship starts between August 2018 and March 2019, compared with 362,400 in 2016/17 and 346,300 in 2015/16, according to statistics from the Department for Education.
What Happens To The Payments Made By Businesses?
Payments go into the online Apprenticeship Service. Companies that are paying the Levy have access to funds to support their apprenticeship programmes. The use of the Levy for funding apprenticeships is the responsibility of the Department for Education (DfE) and the Skills Funding Agency (SFA) in England, with separate arrangements in Scotland, Wales and Northern Ireland.
What Can Businesses Spend Levy Funds On?
The funds can be spent on training programmes for promising, entry-level talent and senior employees looking to move into the next stage of their careers. Additionally, funds have to be spent with an approved training provider and assessment organisation.
What Can’t The Funds Be Spent On?
Businesses are unable to claim costs of setting up an apprenticeship programme, staff or apprentice wages, travel and subsidiary costs or work placement programmes.
What Happens If Businesses Don’t Use It?
Businesses are still liable to pay the Levy whether they access it or not, so it’s in an employers’ best interest to see how best they can benefit from the funds they are entitled to.