15th February 2017

UNW Employment Tax and Payroll Partner Lee Muter explains what the soon to be introduced Apprenticeship Levy will mean for businesses.

Lee Muter, Employment Tax and Payroll Partner at UNW

The Apprenticeship Levy, first announced by the then Chancellor George Osborne in the 2015 Autumn Statement, requires all companies with a payroll totalling more than £3 million to invest 0.5% of their wage bill into a new fund.

Coming into effect from 6 April 2017, it is hoped that the charge will help the government to fund three million apprenticeships by 2020. Eligible employers will be able to access the fund, which is expected to reach almost £3bn, to pay for apprenticeship training for their staff.

Recently published HMRC guidance confirms employers, regardless of sector (including any connected companies or charities), will need to report their Apprenticeship Levy liability each month from the start of the tax year if their annual wage bill was either more than £3 million in the previous tax year, or is expected to be more that £3 million in the current tax year. If their annual wage bill unexpectedly increases to more than £3 million, employers will need to start reporting from that point.

Employers will receive an annual allowance of £15,000, given on a pro-rata basis throughout the tax year, to offset against their levy payment.

Illustrative examples:

A business with a wage bill of £3m:

£3,000,000 (wage bill) x 0.5% (levy payment) = £15,000 (pre-allowance) – £15,000 (levy allowance) = £0 (payable)

A business with a wage bill of £5.5m:

£5,500,000 (wage bill) x 0.5% (levy payment) = £27,500 (pre-allowance) – £15,000 (levy allowance) = £12,500 (payable)

Companies will need to report to HMRC how much Apprenticeship Levy they owe each month as part of their normal payroll process using the Employer Payment Summary (EPS) within their software package or by using HMRC’s Basic PAYE Tools (BPT). This should include the amount of the annual Apprenticeship Levy allowance allocated to their PAYE scheme, plus the amount of Apprenticeship Levy owed to date in the current tax year.

If you would like further information or advice on the Apprenticeship Levy or any other employment tax or payroll matters, please contact:

Lee Muter
Employment Tax and Payroll Partner

T +44 (0)191 243 6089
M +44 (0)7810 852 362
E leemuter@unw.co.uk

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