Apprenticeships

Q&A: How to prepare for the new apprenticeship levy

01-Jun-2016 - Last updated on 07-Jun-2016 at 14:28 GMT

The government's new apprenticeship levy comes into effect in April 2017. The levy will be a payroll tax, but employers that pay into the levy will receive more than they pay in through a monthly 10% top-up from the government. This money can be claimed within 18 months by employers that submit proof to a government department that they are running apprenticeship schemes. Jill Whittaker from HIT (Hospitality Industry Training) spoke to the PMA to give the lowdown on what the levy entails and if there are ways that the pub and hospitality industry can make the most of the new initiative.

Can you give us a brief summary of what the apprenticeship levy entails?

Basically it’s a new payroll tax that is being introduced from the new tax year next year (the 6^th April 2017). It will apply to anybody whose annualised payroll is more than £3m. That’s an awful lot of businesses; if you’ve got 150 staff on an average of £20,000 a year, that’s you.

It applies to every organisation or business that breaches the payroll threshold. That will include charities and not-for-profits. It’ll be the overall holding company as well, so if you’re looking at one of the big groups. Whitbread, for example, that would include all of their brands as one organisation; Costa and Premier Inn couldn’t be separated out. You would have to have it all as one organisation.

There are some huge businesses out there that are going to be paying a phenomenal amount; there’s going to be lots of smaller ones, who will not be paying much. The bottom line is that basically if you’re not in apprenticeships of one form or another, it becomes another tax. Our message to those in the industry who are going to be in for payments is ‘come and talk to us, let’s see how we can integrate some apprenticeship programmes and make it work for you’.

There is potential if you’re smart to use those levy payments in a really effective way to help your business.

What of employers that don't need to pay the levy?

Even if your annual pay bill is less than £3m and you're not paying the levy, you will still need to pay for apprenticeships through the levy scheme. However you can also still capitalise on the government contribution through co-investing funding towards apprenticeship training. The exact amount that will need to be paid will be announced at the end of 2016.

How can employers go about claiming back the levy?

The system is still being designed, but basically they will need to appoint a training organisation that is on the register of training organisations. You can get approved to do it yourself, so some of the very large organisations may wish to get their own approval to do their own training provisions. But I would say the vast majority will wish to bring in a specialist that can do that for them.

In terms of actually getting the cash back, the levy will come out of your payroll every month.

The government will set up an online service that you will need to register on as an employer.

As and when you take on apprenticeships and you appoint your registered training organisation, there will be a process by which you show you have apprentices, the government will take that away, process it and the money starts to flow.

The training organisation will get paid for delivering the apprenticeship organisation, but no cash will actually change hands between the levy payer and the training organisation. It will come straight from the government via a digital service.

Levy — A flow chart showing how the levy works and how you can claim money from it — whether you're a levy paying employer or not

Will it be more complicated?

For sure. One of the things that we don’t know is what that digital apprenticeship service is actually going to look like. I would say that they’re going to be introducing it in 10 months’ time, but they’re not actually quite ready. There’s an awful lot of work going to be done over the next few months. I think there’s going to be an awful lot of uncertainty up until the 11th hour.

Calculate how much you will need to pay for the levy when the new rules come in here.

How can employers prepare to ensure there is not uncertainty at the 11th hour?

We’re the largest training provider in the hospitality and catering sector, so we make it our business to keep our ears to the ground to make sure that we know as news breaks and more information becomes available, and we make sure that we let our clients know about it. I would say keep an eye on our website as we’ll be letting you know as and when the changes come through. We’ve got the apprenticeship levy handbook, which has gone out to lots of our clients. We’re expecting more news in June and we’ll be doing another mail out then.

HIT's Apprenticeship Levy handbook can be viewed and downloaded here.

Can you give me a summary of what’s included in the handbook?

Everything that’s currently available on who the levy will affect, what the level of participation will be and the percentage that will be paid out.

If you had to give one piece of advice ahead of the changes, what would that be?

Once you’re in apprenticeships and you get the benefits of apprenticeships, you will be in a much better position next April when all the changes come in to take full advantage of any levy contributions you are making. Basically don’t leave it too late.