The apprenticeship levy comes into force with effect from 6 April 2017.
Payment of the levy applies to ALL businesses, even if you do not have apprentices and may impact on many small businesses where they are “connected” with other businesses.
WHO DOES THIS EFFECT
Any business or group of connected businesses with an annual wage bill of £3m or more.
Connected means any business which has common owners, is under common control or is within a corporate group. This includes sole traders, partnerships and limited liability partnerships, not just limited companies.
The definition of commercial inter dependence means family run companies are classed as connected where the businesses depend on each other for administrative and/or financial support.
The rules also affect trustees and businesses owned by a trust.
HOW MUCH DOES IT COST?
The apprenticeship levy is 0.5% x annual payroll bill.
The annual payroll bill includes all earnings subject to employer national insurance contributions, including wages, bonuses, commissions, and payments to employees below the lower earnings threshold, under the age of 21 and appretices under the age of 25.
Each group of connected businesses is entitled to an annual allowance of £15,000. The allowance can be shared across the connected businesses but only one allowance is available.
The allowance is deducted from the apprenticeship levy calculated as outlined above.
HOW IS IT PAID
The cumulative apprenticeship levy, net of allowance is paid to HMRC as part of the monthly PAYE process.
- There is no exemption for people who already pay into an industry training levy arrangement (such as the Construction Industry Training Board levy).
- Records must be kept for at least 3 years after the tax year end.
- Recruitment businesses are subject to the levy if their annual pay bill exceeds £3m, including any labour supplied to clients.
- Schools and academies are also liable to the apprenticeship levy if the rules above apply, although local authority maintained schools are handled via the local authority and not the school itself.
You need to establish whether your business has an annual pay bill in excess of £3m OR if you are connected with other businesses, where the combined annual pay bill exceeds £3m. In either case, exceeding £3m will mean calculating and paying the levy.
As we may not know the combined annual pay bill of all connected businesses, please take some time to check if you are caught by this new levy. If you are and we process your payroll, please contact us immediately so we can discuss the information we require in order to report your apprenticeship levy to HMRC.
If you have any questions or concerns about the apprenticeship levy and would like to discuss them with us, please do not hesitate to contact Ian Smith our Payroll Services Partner or Jackie Waterston, the Senior Manager in charge of Payroll Services.