The Apprentice Levy

Introduced in 2017 as a form of taxation designed to help companies offer more in the way of apprentice opportunities. Any company offering approved apprenticeships can tap into the funds raised from a levy exacted against employers with a payroll bill in excess of £3m per annum (£250,000 per month).

However, what a lot of companies are not aware of is that, even if they do not have apprentices, any company, or charity, with a payroll bill in excess of £3m is subjected to the levy. It also applies to:

• Any connected companies or charities, with a combined payroll bill in excess of £3m is subjected to the levy
• Any connected companies, or charities, with combined payroll bills of less than £3m are not subjected to the levy.

The annual payroll bill includes all payments made to employees that are subjected to Class 1 NIC contributions, such as commission, bonus, holiday pay etc. The payroll bill does not include earnings for employees under the age of 16, nor earnings for employees who are not subject to NIC contributions. Neither does the payroll bill include earnings not subjected to Class 1A NI, such as benefits in kind.

The Apprentice Levy is charged at 0.5% on the gross payroll total over £250,000 per month. The first £15,000 over the £3m can be offset across the tax year, but any unused amount cannot be carried forward to the next tax year. This offset amount can be split & made available to any connected companies & the split needs to be reported to HMRC via an EPS return.

For example:

An employer has a payroll bill of £300,000. It is part of a connected group of companies & enjoys the benefit of £10,000 offset allowance.

300,000 – 250,000 – 833.33 X 0.5% = £246.00 levy to pay. The figure is rounded either up or down to the nearest full £

An employer has a payroll bill of £375,000, it too is part of a connected group of companies but has no offset to apply.

375,000 – 250,000 X 0.5% = £625.00 to pay

You must apply the levy if your payroll bill is more than £3m, or if you think the bill may rise above £3m. The levy is applied on an annual basis & does not carry across to the following tax year. Once applied, an EPS needs to be sent to HMRC each month alerting the revenue to how much, if anything, has been charged even if the payroll bill falls beneath £3m. Any levy paid early in the tax year will be re-paid via a PAYE credit if the levy is no longer payable.

Businesses need to be aware that even if they think they are not affected they could be if they are connected to other businesses.

Disclaimer - All information in this post was correct at time of writing.