The levy will be 0.5% of an employer’s pay bill for a tax year less an annual allowance of £15,000. This means that the levy will start to operate on earnings over £3 million in the relevant tax year. 

The levy is to take effect from 6th April 2017. It will apply to employers who are liable to make employer’s national insurance contributions and will be collected through PAYE. If two or more organisations are connected, they will only have one allowance between but they will be able to decide which of them has the allowance. Connected organisations are where one has control over another or both are controlled by a third person or organisation. Where the connected organisations are both charities, they will also need to have the same or substantially similar purpose and activities.

“Earnings” will have the same meaning as it does for national insurance purposes and where earnings are exempt from national insurance, they will not count towards earnings for the purposes of the levy.  However, the various national insurance thresholds will be disregarded for the purposes of the levy.

The government plans to create an online portal called the Digital Apprenticeship Service which all employers will be able to access. Employers who have paid the levy will receive electronic vouchers of £15,000 to off-set the levy and will potentially be able to get out more than they have paid in, if they are committed to training apprentices. All employers, including those who have not paid the levy, will be able to get some support. HMRC anticipates that fewer than 2% of employers will be caught by this levy but it has been criticised by some employers who make little use of apprentices as funding apprentices for others.

There are also various anti-avoidance provisions to catch earnings which are deferred or paid off-payroll though service companies.

For more information

Please contact Doug Mullen.

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