SMEs boost on apprenticeship levy

The government has halved the apprenticeship levy for small businesses, from 10% to 5%, with a view to increasing uptake of the scheme.

This means that the government will pay 95% of training and assessment costs for any apprentices taken on by SMEs. Whilst a date for implementation has yet to be announced, the move is designed to make the underutilised scheme more attractive to employers and help address the skills shortage in the UK workforce.

The number of new apprenticeships dropped by 26% from 2016/17 to 2017/18. Worse, reports suggest that as many as one-fifth of firms paying the apprentice levy, including 35% of SMEs, do so as a tax write-off and have no plans to actually train apprentices. The levy industry bodies believe the levy is poorly understood by many SMEs.

First introduced on 6 April 2017, the levy was meant to encourage workplace training through a 0.5% tax on larger employers. As well as paying the levy, businesses with 50 or more staff also have to release apprentices for one day a week of off-site training.

Alongside this, the government will enable larger levy-paying employers to transfer up to 25% of their funds – increased from 10% – to pay for apprenticeship training in their supply chains.

If you do choose to take on an apprentice, you must provide them with a training opportunity that lasts at least 12 months and employ them in a real job that helps them attain the knowledge and skills needed to pass their assessment.

Apprentices must also receive the same benefits as other employees and are paid for their time spent training or studying off-site. However, their minimum wages are set much lower, at £3.90 per hour for 2018/19.

If you are considering taking on an apprentice and would like some advice on the levy, please get in touch.

Talk to Barnes Roffe today
Share this page:
Contact Us
ICAEW The Chartered Institute of Taxation ACCA IPG IR