The Apprenticeship Levy came into force this April, and will effect companies or groups with a wage bill of £3 million or higher. We have had many enquiries around the Levy as it is not particularly straightforward, and there has not been as much publicity as might have been expected. Where it is a single company affected it is not too difficult, but things become more interesting where there is a group of companies.
The wage bill for the purposes of the Levy is all pay subject to secondary class 1 National Insurance Contributions, such as wages, bonuses and commissions. The Levy is an additional 0.5% charge which will be reported through Real Time Reporting and paid to HMRC in the usual way.
In payroll we are concerned with the Apprenticeship Levy and how money is deducted through the payroll, but there have also been changes with the Apprenticeship Service and how employers source funding for their training needs.
With the Apprenticeship Levy there is a £15 000 per year allowance available per company or per group, this is where the wage bill of £3 million or higher comes in (0.5% of £3 million is £15 000). The Levy is calculated per month on a cumulative basis, as is the allowance. The allowance can be divided between companies within a group, or one company could take it all and the others have zero.
Some examples from our understanding of the Apprenticeship Levy –
Company has £500 000 annual wage bill and is not part of a group.
Liability would be 0.5%, so £2 500, but the allowance is £15 000 so this company does not have to pay the Levy
Company has £500 000 annual wage bill but is part of a group
Liability would be 0.5%, so £2 500, and the allowance has been set to zero, so this company has to pay the additional £2 500 across the year.
Company has £2 000 000 annual wage bill but is part of group
Liability would be 0.5%, so £10 000, but they have £5 000 of allowance allocated to them, so this company would pay an additional £5 000.
It is month 3, the year to date wage bill is £800 000.
Liability is 0.5%, so £4 000, and the company is not part of the group so has the full allowance.
The allowance available is 3/12 of £15 000, so £3 750, therefore the company has a Levy to pay of £250 to date.
In Example 4 if the company’s wage bill reduced and ultimately was lower than £3 million across the year, any overpaid Levy would have been credited back to the company via a reduction in their payments to HMRC.