This briefing paper is about the Apprenticeship Levy: what it is, how it will work and what the debates around it are.
The Apprenticeship Levy - FAQ
What is it?
The Apprenticeship Levy is a new charge set at 0.5% of any large UK employer’s pay bill worth more than £3 million. It aims at providing employer-led funding for the 3 million apprenticeship starts the Government wants to create by 2020.
How does it work?
All employers will have a £15,000 allowance to offset against their levy payment. In effect, this means that employers will only pay the 0.5% portion if their pay bill is above the £3 million threshold.
Who will be eligible?
The Government estimates that less than 2% of UK employers will be eligible against those criteria, including public sector organisations like the National Health Service and government departments. Regardless of whether they have apprentices or not, all UK employers with a pay bill worth more than £3 million will pay the levy.
When will it be introduced?
The levy will be introduced on 6 April 2017 and replace the current system in which the bulk of apprenticeship funding was supplied by the Government.
How much revenue will it generate?
The Government predicts that by 2019-20 the levy will bring in over £3 billion of revenue per year.
How will it be used?
Revenue generated by the levy will be equally available to employers that pay and do not pay the levy to pay the training costs of approved English apprenticeships. Recent government guidance suggests that those who don’t pay into the levy will still contribute to part of the training costs. Employers who do pay into the levy will receive 10% top-ups on their levy payments. The funding will be accessible via online accounts.
Will the amount of funding one can buy with levy funds be capped?
Yes, the so-called “training vouchers” will be capped and limited in time (18 months).
Will it be spent in England only?
The levy is UK-wide but the bulk of it (£2.5 billion) will only be spent exclusively on English apprenticeships and in England. The rest (£500 million) will be split among the three devolved nations.
Who will collect the levy?
HM Revenue and Customs.
Who will monitor and decide how funding is spent?
The Institute for Apprenticeships – it was legislated for in the Enterprise Act 2016. Its role will be to advise the Secretary of State for Business, Innovation and Skills on the administration of funding raised with the levy to various apprenticeship standards.