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European Social Fund in England and Gibraltar

New Apprenticeship Standards

Apprenticeship Levy FAQ's

Frequently Asked Question's

Who is required to pay the levy?

All businesses across the UK are affected. The ability to access the levy money however, is restricted to England. A proportion of the levy money collected will be given to the devolved nations who have the freedom to spend the money as they choose. This could be on Apprenticeships, general training or indeed roads, health service or any other areas they feel are important. Westminster cannot dictate usage, as skills policy is set at the devolved nation’s level. As yet, the devolved nations have not declared how they will use the money.

When is the Levy Start date - The Timing?

The levy will come into effect from April 2017.

How is the levy collected?

It will be taken from your monthly returns to HMRC.

  • As ITS works to protect and maximise the quality of provision and delivery of the training to ensure the money reaches the learners, we would welcome the opportunity to speak to you about how we can assist you in managing your Levy on an ongoing basis.

What is The Levy Rate?

This is 0.5% of the annual salary bill – your pay bill will be based on the total amount of earnings subject to Class 1 secondary National Insurance Contributions (NICs). Although earnings below the secondary threshold are not counted when calculating an employer’s NICs, they will be included for the purposes of calculating the amount of levy the employer needs to pay.

Earnings include any remuneration or profit coming from employment, such as wages, bonuses, commissions and pension contributions that you pay NICs on. The Government will not charge the levy on other payments such as benefits in kind, subject to Class 1A NICs.

Only businesses with a salary bill of £3m or above will be affected. Those with a salary bill below £3m will be exempt due to a tax allowance that offsets the levy of £15,000 (equivalent to 0.5% of £3m). This means it’s possible to start to calculate your potential levy bill.

If your organisation is part of a group or connected to another business in any way you will only be entitled to one allowance across the group. Businesses will need to decide how to share this between the connected organisations.

Will employers with a salary bill of less than £3m be affected?

Contact Intrinsic Training Solutions we will advise and guide you in using your levy:

Telephone: 01482 845358 e-mail: 01482 845358

The £3m is a single group level allowance – so even if individual sites in a group have a bill of less than £3m the allowance will only apply once and they will be in scope.

The levy will be payable through Pay As You Earn (PAYE) and will be payable alongside income tax and National Insurance. To keep the process as simple as possible “paybill” will be based on total employee earnings subject to Class 1 secondary NICs. Each employer will receive one annual allowance of £15,000 to offset against their levy payment. There will be a connected persons rule, similar the Employment Allowance connected persons rule, so employers who operate multiple payrolls will only be able to claim one allowance.

What about small businesses?

Smaller businesses will not have a levy - in the first year of the levy they will not access the digital voucher system although government are keen to expand it. They will contract and pay providers directly and providers will draw down funding from Government (as per the current system).The current proposals are to significantly increase the amount of Government support available to small businesses – results of consultation due at the end of October but current proposal are for only a 10% contribution from organisations.

How will the levy be paid?

You will calculate reports and pay your levy to HMRC, through the Pay as You Earn (PAYE) process alongside tax and National Insurance Contributions (NICs).

If you have calculated that you will pay the apprenticeship levy, you will need to declare this and include it in your usual PAYE payment to HMRC by the 19th (or 22nd if you report electronically) of the following month.

This amount will then be paid back to you via you own digital account and accessible the following month.

The first payments will be made by organisations in April 2017 and accessible in May 2017. More guidance is due out on the HMRC returns process in the next few weeks.

How will the Levy be Accessed ?

Once registered for the new digital service, levied employers will be able to select their PAYE schemes and access funds available to them as a result of their levy payments. This will allow employers with multiple PAYE schemes and connected companies to aggregate levy funds into one account on the service.

Employers will be able to see their levy contributions coming into the account monthly and accumulating over time.

Funds will first appear in account in late May 2017 after the employer has completed their RTI submission for April 2017.

What happens to my levy if I don’t use it?

Funds will expire 18 months after they enter your digital account unless you spend them on apprenticeship training. This will also apply to any top-ups in your digital account. For example, funds entering your account in September 2017 will expire in March 2019, unless you have spent them.
Each nation is currently undergoing a consultation on how it plans to spend their share of the Levy – updates are not expected until EARLY 2017.

How will sites and businesses outside England train apprentices?

There are currently no plans for the same ‘digital voucher’ system to operate in the devolved nations and so access to funding for apprenticeship training is available to providers via the normal set ups. Currently providers have funding and employers will work with their training providers to undertake apprentices. Remember, the new Trailblazer Apprenticeships are not available in the devolved nations – they are still using the ‘Apprenticeship Frameworks’. There is no intention in the devolved nations to change these. In food and drink the NSAFD is working to develop new qualifications within these national frameworks that build on the Trailblazer qualifications and enable multisite businesses to use these to replicate – to a degree.

What can digital vouchers be used for?

To pay for the training costs of Apprenticeships. They cannot be used to pay salary costs, learner accommodation costs or learner’s travel and subsistence.

They do not need to cover the costs of training in Maths and English as these are funded separately.

What restrictions are there on who can be trained as an apprentice and funded via the levy?

Digital vouchers can be used to pay for new Apprenticeships – whether they are started by a current worker or a new starter.

  • As ITS works to protect and maximise the quality of provision and delivery of the training to ensure the money reaches the learners, we would welcome the opportunity to speak to you about how we can assist you in managing your Levy on an ongoing basis.

Cross-border funding

The current apprenticeship funding rules place conditions on which individuals can be funded to undertake an apprenticeship through the English system. The Government propose to simplify the current rules and apply a single test for whether apprenticeship training can be funded through the English system, depending on whether the apprentice’s main place of employment is England. The government propose that the definition of workplace is the physical place of work, designated by the employer, where the apprentice is expected to spend the majority of their time during their apprenticeship (more than 50%).

Transferring funds between organisations

During 2018, subject to a final value for money assessment, the Government propose to introduce means for employers to transfer up to 10% of the levy funds entering their digital account in a given year, to another employer with a digital account or to an ATA. The Government will assess the impact and effectiveness of these arrangements before considering how they could be expanded.

How much will each Apprenticeship cost? What flexibility is there to negotiate?

The release of a new table of funding bands that all Trailblazers and Current Frameworks will sit within:

All existing and new apprenticeship frameworks and standards will be placed within one of these funding bands; this will depend on the level and type of apprenticeship. The upper limit of each funding band will cap the maximum amount of digital funds an employer who pays the levy can use towards an individual apprenticeship. The upper limit of the funding band will also cap the maximum price that government will ‘co-invest’ towards, where an employer does not pay the levy or has insufficient digital funds and is eligible for extra support. Different levels and complexities of apprenticeships for different roles have different rates. The final banding for all Frameworks and Trailblazers will be announced at the end of October.

Can Employers negotiate the best price for the training they require?

The rates will represent the maximum that can be used from the levy and no lowest rates – if a business negotiates a lower rate then they will only claim the lower rate from their levy; if they pay a higher rate than the funding rate then companies will have to pay for this from additional funds - i.e. they cannot use the levy funds to pay for additional costs above the rate set by the Government.

The price you agree should represent

  • The cost for a provider to deliver the apprenticeship training required to a learner in a company
  • This should include the End Point Assessment costs are usually about 20% of funding; i.e. if the Apprenticeship is £6,000, £1,200 of that is for the end assessment.

Who can I spend my digital voucher with?

The SFA are launching a new register for provider call the RoATP – all providers will need to be registered onto this to access the Levy via digital accounts.
Providers will begin applying to be on this register from October 2016 and the successful providers will not be announced until March 2017 – extremely close to the start date of the Levy.
If a provider is not on this register, they will not be able to work with organisations that have digital accounts. This register will just provide names of providers but will not provide guidance on the capability of a provider to deliver the Apprenticeships. 

Can We Sub-Contract?

Within the current system there is a significant amount of subcontracting between providers and Government is keen to minimise the level of this and is considering the following measures:

A lead provider e.g. Intrinsic Training Solutions (ITS) must deliver a minimum of 50% of each learner’s apprenticeship (i.e. can only subcontract parts of the standard where specialist support is required.
The lead provider must get the employers agreement to sub-contract parts of the apprenticeship.
Government will allow managed agent arrangements but these sit outside of the system. Many providers and other organisations are offering this service, but at significant cost to either the business or the amount of funding a provider will receive, ultimately impacting on the quality of the programmes.

  • As ITS works to protect and maximise the quality of provision and delivery of the training to ensure the money reaches the learners, we would welcome the opportunity to speak to you about how we can assist you in managing your Levy on an ongoing basis.

How can I best prepare to use the Levy?

We recommend that you start by working out the costs of the training activity you are currently doing or planning to do with Apprenticeships in the new world of the levy.

We can help you work through this calculation –  At this stage the figures are preliminary, however they do provide a useful guidance as to what the future implications may look like.

Want to find out more? Contact ITS!