Autumn Statement and Spending Review 2015: apprenticeship levy rate set at 0.5%

Out-Law News | 27 Nov 2015 | 9:42 am | 2 min. read

The planned 'apprenticeship levy', which will be used to fund the UK government's target of three million new apprenticeships over the next five years, will be charged at 0.5% of the wage bills of the largest employers, the chancellor has announced.

The levy, which is expected to raise £3 billion a year, is due to be introduced in April 2017. Every business will receive a £15,000 allowance to offset against the levy, which will remove all businesses with wage bills of less than £3 million a year from the scope of the new charge, according to plans set out in the government's 2015 Autumn Statement.

Less than 2% of UK employers will be subject to the levy once the allowance is taken into account, according to government projections. All employers in England who pay the levy and are "committed to apprenticeship training" will benefit by more than they pay into the levy, and apprenticeship programmes overseen by the devolved administrations in Scotland, Wales and Northern Ireland will receive their "fare share", the government said.

The levy will apply to employers operating across all fields of business, including those that already have an industry-specific apprenticeship programmes in place. Employment law expert Edward Goodwyn of Pinsent Masons, the law firm behind Out-Law.com, said that the proposals would "undoubtedly have implications" for the existing levies run by the Construction Industry Training Board (CITB) and Engineering Construction Industry Training Board (ECITB) on behalf of their respective industries.

"The apprenticeship levy is an issue that is applicable to all employers, but is of particular interest to infrastructure firms notably because as of October 2014 they voted in favour of retaining the levy that the CITB and the ECITB raise in those sectors," he said.

"For large employers, the prospect of paying the existing levies plus the new apprenticeship levy will be expensive. How the two will interact is not yet clear," he said.

Once the levy is in force, large employers will receive digital vouchers based on the amount that they pay into the system to fund their own apprenticeship places. Smaller employers that are not liable for the levy "will be able to access government support" for their apprenticeships, according to the Autumn Statement document. The government also intends to establish an independent, "employer-led" body to set apprenticeship standards and advise on the level of levy funding each apprenticeship should receive.

The new levy will be payable through Pay as You Earn (PAYE) on a monthly basis. Tax expert Eloise Walker of Pinsent Masons said that it was effectively an additional payroll tax, backing views expressed by employer groups including the Confederation of British Industry (CBI) and Institute of Directors (IoD).

"If the government had increased employers' National Insurance contributions by 0.5%, there would have been an outcry," she said. "Instead they are introducing an 'apprenticeship levy', which is a tax on employers calculated by reference to employee salaries."

"I am pleased for smaller businesses that they will escape it, but it is bad news for everyone else," she said.