TT257: The Apprenticeship Levy

This has now been introduced with effect from 6 April 2017 for all employers (company or partnership) with an annual payroll in excess of £3m (including associated companies). The Apprenticeship Levy must be applied if your 2016/17 payroll total was more than £3m (all payments to employees that are subject to Employers NIC’s) and should also be paid if you think the 2017/18 pay will increase to this level (or if it unexpectedly rises so that this level is likely to be breached).

The basic Levy is to be calculated at the rate of 0.5% of the total pay that is subject to NI and is calculated on a monthly basis. Thus, if the total payroll is £300,000 for Month 1, your Levy is £1,500.

There is an Apprenticeship Levy allowance of £15,000 p.a. which is to be applied at the rate of £1,250 per month against the amount due. It must be noted that this allowance can only be utilised once across all PAYE Schemes that are operated, and the Employer will need to decide how this is to be apportioned amongst their Schemes at the start of each year.

In the above example the amount due for Month 1 would be £250. (£1,500 – £1,250). This needs to be added to the amount of PAYE that is to be paid by the 19th of the following month. Once an employer commences reporting and paying the Levy they must continue to do so for the full tax year even if their payroll total falls below the threshold and there is nothing further to pay.

The Levy details are to be reported on the Employer Payment Summary (EPS) each month, and the same regime applies for time limits, penalties and appeal procedures as for existing PAYE.

The levy can be used for Employers to offset their cost of funding apprenticeships. Access to funding will be via the new Digital Apprenticeship Account (DAS). There are changes to the funding of apprenticeships which will operate from 1st May 2017 regardless of whether or not the employer pays the levy.

Over the past few months HMRC have been contacting all employers that it has identified as being likely to have to pay this Levy but-

If you think that you may be affected by the new rules and are unsure of what needs to be done please contact your Barnes Roffe partner for further guidance.

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