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All You Need to Know about the Apprenticeship Levy


Claire Knowles, partner at Acuity Legal and employment law expert, sets out everything you need to know about the Apprenticeship Levy and how it could affect Welsh businesses.

The aim of apprenticeships is to raise skills to meet the needs of employers, enable people to reach their full potential and drive prosperity and productivity in the economy.

The Apprenticeship Levy is a levy imposed by the UK Government that becomes payable from 6 April 2017.

All employers with a total wage bill over £3m will be required to pay. An employer’s ‘wage bill’ includes the total employee earnings subject to Class 1 secondary NICs. Therefore bonuses, commissions, allowances and overtime are included.

However, as ‘skills’ is a devolved issue, England, Wales, Scotland and Northern Ireland will be able to decide for themselves how training and apprenticeships should be delivered.

Initial indicators suggest that the levy will create demand for apprenticeships and training across the private and public sectors.

When plans were initially announced, many Welsh employers felt that the levy was another tax for which they would get nothing in return. However, in the last few months greater communication by the Welsh Government has resulted in a better understanding of how the apprenticeship system works (and has been working for years) in Wales, and how successful it has been.

Here’s everything you need to know about the levy and how it could affect your business.

Do I need to pay the levy?

If the annual wage bill for your business exceeds £3m then you are required by law to pay the levy.

How much will I be required to pay?

 The amount you are liable to pay is a 0.5 per cent levy on your total wage bill. There is an annual allowance that reduces the amount of levy by £15,000. However you should be aware that if your company forms part of a group, this reduction may only be eligible for the group as a whole. It is also your responsibility to notify HMRC and adjust your PAYE system.

How can I make this work for my business?

 It’s best to start by taking a look at your workforce planning – could you turn a naturally occurring vacancy or existing position into an apprenticeship?

The system in Wales will not be the same as the voucher system in England, so much of what has already been in place will stay the same.  If you do want to take on an apprentice (whether that be an existing or new employee), you can approach the Welsh Government or one of the other 19 registered providers.

These providers work with Welsh Government to deliver one of the 180 frameworks already in place, or alternatively, they can create a bespoke training package to fit the needs of your business.

Any Welsh business can apply for Welsh Government funding, including SMEs. There is absolutely no correlation between the amount of levy paid and the amount of funding you could receive. To apply for funding, the employee you wish to train must spend 51 per cent or more of their time working in Wales.