What is important to know about the Levy Tax in 2018
It’s been nearly 12-months since the levy tax came into force and organisations now have had some time to get their head around everything related to the new apprenticeship standards and funding system.
As a provider involved from an early stage, it has been interesting to view the response strategies of organisations across England. We are finding that organisations basically fall in to one of three camps:
- They have a well-crafted strategy to manage and fund apprenticeships; often employing resources to oversee this
- They are waiting to see what other companies do
- They choose to just pay the tax and accept the stakeholder response to this
With such a varying response in the market, we thought it would be useful to recap some of the basic need to know facts about the levy. If you are an organisation that doesn’t have a clear strategy for their levy yet, then you may be in danger of losing your levy pot and not maximising the potential of these funds.
What is the levy tax?
During April 2017, the government introduced the apprenticeship levy, a compulsory tax for employers to fund the development and delivery of new apprenticeships.
Who pays the levy tax?
The levy requires employers with an annual pay bill of more than £3 million to pay 0.5% of their payroll costs minus a £15,000 government allowance towards apprenticeship training.
How is the levy tax managed?
The employer will make monthly levy payments through a new online scheme called the Digital Apprenticeship Service (DAS). This enables the employer to manage their apprenticeship funding and delivery through a virtual account.
Who doesn’t pay the levy tax?
Employers generally fall in to two camps – levy payers and non-levy payers. If a company’s annual pay bill is less than £3 million, then they do not have to pay the levy. They won’t be required to use the Digital Apprenticeship Service. Non levy payers can access co-investment funding where they will contribute 10% towards the cost of apprenticeships and the government will pay the remaining 90%.
What can levy funds used for?
Levy funds can only be used towards the cost of Apprenticeship training and end-point assessment with an approved training provider.
What happens if an employer’s Levy funds don’t cover the cost of the training?
If levy funds don’t cover the full cost of the Apprenticeship, employers can benefit from additional government funding available known as the co-investment model. The contribution by the government will be 90% and employers contribute 10% to the remaining costs of the Apprenticeship.
What happens if companies don’t spend their levy?
If companies don’t spend their levy on apprenticeships, in a nutshell, they lose it.
How long do employers have to spend their Levy?
Levy funds will expire 24 months after they enter the digital account unless employers spend their levy on Apprenticeship training. Money is spent when it leaves the digital account as a payment to a training provider. The account works on a first-in, first-out basis. Whenever a payment is taken from the digital account it automatically uses the funds that entered your account first.
How can an organisation benefit from the levy?
The new apprenticeships provide organisations with significant opportunities to develop current and future capability and pave the way for continued growth and success. Managed in the right way with the right provider, an organisation should expect to see measurable results from the outset of the apprenticeship.
To find out more about how Adalta help organisations to develop a strategy for their levy including how to best structure the 20% off the job learning in a way that delivers value, fill in the form below:
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