Apprenticeship Reforms and Funding

The Apprenticeship Levy

In April 2017, the way the government funds apprenticeships in England changed. Some employers will be required to contribute to a new apprenticeship levy, and there will be changes to the funding for apprenticeship training for all employers. The apprenticeship levy requires all employers operating in the UK, with a pay bill over £3million each year, to make an investment in apprenticeships.

Employers can benefit from this investment by training apprentices using both standard and trailblazer frameworks. The guidance provides information on how the apprenticeship levy will work, and how its worked since it was introduced on 6 April 2017. It also explains the principles that apprenticeship funding and the levy has operated since April 2017, whether employers pay the levy, or not.

Employers can find out more about the benefits apprenticeships can bring to employer’s organisation and about the way apprenticeships are being reformed, in our vision for apprenticeship. The reforms include giving employers the opportunity to add to the new apprenticeship standards already available by developing standards that meet their precise needs.

Funding

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Funding FAQs

  • How is the apprenticeship levy paid?

    Employers will need to pay the apprenticeship levy if employers are an employer, in any sector, with a pay bill of more than £3 million each year.

    For the purposes of the levy, an ‘employer’ is someone who is a secondary contributor, with liability to pay Class 1 secondary National Insurance Contributions for their employees.

    The levy will be charged at a rate of 0.5% of employer’s annual pay bill. Employers will have a levy allowance of £15,000 per year to offset against the levy employers must pay.

    This means employers will only pay the levy if employers pay bill exceeds £3 million in a given year.

    Employers will pay the levy to HM Revenue and Customs through the Pay as Employers Earn process.

    Employers pay bill will be based on the total amount of earnings subject to Class 1 secondary.

    Although earnings below the secondary threshold are not counted when calculating an employer’s, 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 employers pay on. The UK Government will not charge the levy on other payments such as benefits in kind, subject to Class 1A

    Employers will pay the levy on employer’s entire pay bill at a rate of 0.5%. However, employers will have a levy allowance to offset against this. The levy allowance is worth £15,000 for each tax year. This means the levy is only payable on pay bills over £3 million (because 0.5% x £3 million = £15,000).

    The levy allowance will operate on a monthly basis and will accumulate throughout the year.

    This means employers will have an allowance of £1,250 a month. Any unused allowance will be carried from one month to the next. For example, if employers levy liability in month 1 is £1,000 employers will not pay the levy and employers allowance in month 2 will be £1,500.

    If employers have some unused allowance in a month, but paid the levy previously in the tax year, employers can receive a credit which employers can use to offset against employer’s other liabilities. The credit will also reduce the amount of levy paid.

    If employers have multiple schemes and do not use the full £15,000 allowance, employers will be able to offset the unused amount against another one of employer’s schemes once the tax year has ended.

    Examples of what employers will pay

    Example 1: an employer who would pay the levy

    An employer with an annual pay bill of £5,000,000:

    • levy sum: 0.5% x £5,000,000 = £25,000
    • subtracting levy allowance: £25,000 – £15,000 = £10,000 annual levy payment

    Example 2: an employer who would not have to pay the levy

    An employer with an annual pay bill of £2,000,000:

    • levy sum: 0.5% x £2,000,000 = £10,000
    • subtracting levy allowance: £10,000 – £15,000 = £0 annual levy payment

    Employers will calculate, report and pay employers levy to, through the process alongside tax and NICs.

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

  • Will the Levy be a valid Corporation Tax deduction?

    Any apprenticeship levy payment to will be allowable for Corporation Tax.

    Where a group of employers are connected they will only be able to use one £15,000 allowance.

    The definition of connected companies and charities is the same as the definition used with the Employment Allowance.

    The government intends to introduce an amendment to the Finance Bill 2016 concerning the allocation of the levy allowance.

    The amendment will mean that if employers are part of a group of connected employers, employers must decide what proportion of the levy allowance each employer in the group will be entitled to.

    This decision must be taken at the beginning of the tax year and will be fixed for that tax year.

    Each employer will then calculate what they have to pay through the same processes set out above but using their portion of the £15,000 allowance.

  • What if an employer already pays into an existing industry levy scheme

    Some industries already operate levy systems, or other collective training arrangements. If employers already contribute to one of these, employers will still be required to pay the apprenticeship levy.

    The Industry Training Boards for the construction, engineering construction and film industries will consult their members on potential changes to their existing levy arrangements.

  • How do employers access money to pay under the apprenticeship levy?

    Once employers have paid the levy to HM Revenue and Customs employers will be able to access funding for apprenticeships through a new digital apprenticeship account.

    Employers will be able to use this to pay for training and assessment for apprentices in England.

    The service will also help employers find training providers to help employers develop and deliver employers apprenticeship programmed or alternatively become employer providers and train their own employees directly.

    Separate arrangements will be in place in Scotland, Wales and Northern Ireland.

  • What if I operate in England and other parts of the UK

    The levy applies to employers across the UK.

    The amount entering employers digital account will be how much employers have available to spend on apprenticeship training in England either with an ITP or paid directly back to themselves as an employer provider.

    Apprenticeships are a devolved policy, which means that authorities in each of the UK nations manage their own apprenticeship programmed, including how funding is spent on apprenticeship training.

    The levy will support the English apprenticeship system. Scotland, Wales and Northern Ireland have their own arrangements for supporting employers to access apprenticeships.

    To calculate how much employers will have to spend through the English system, The UK Government use data that The UK Government already hold about the home address of employer’s employees.

    The UK Government will use this data to work out what proportion of employers pay bill is paid to employees living in England. The UK Government made this assessment in early 2017.

    Employers can update their employees address as part of their Real Time Information returns.

    The UK Government are testing the accuracy and suitability of this approach and will provide more details in October 2016.

  • Will we gain additional support with our digital account?

    The UK Government will apply a 10% top-up to the funds employers have for spending on apprenticeship training in England.

    The UK Government will apply the top-up monthly, at the same time the funds enter employers digital account.

    That means for every £1 that enters employers digital account to spend in England on apprenticeship training, employers get £1.10.

    Furthermore, once employers funds have been fully utilized the UK Government will directly fund further funds by way of a 90% grant.

  • When do the levy funds expire in our digital account?

    Funds will expire 24 months after they enter employers digital account unless employers spend them on apprenticeship training, this will also apply to any top-ups in employers digital account.

    For example, funds entering employers account in September 2017 will expire in March 2019, unless employers have spent them.

    Money is spent when it leaves employers digital account as a payment to a training provider.

    The account will work on a first-in, first-out basis, through either payment or expiry.

    Whenever a payment is taken from employers digital account it will automatically use the funds that entered employers account first.

    This will minimize the amount of expired funds.

    This will happen automatically. Employers digital account will let employers know in good time when any funds are due to expire so that employers can arrange to spend them if employers wish.

  • Can an employer direct funds to another employer?

    Originally first year of the levy, employers were not able to use the funds in employers digital account to pay for apprenticeship training and assessment for other employers.

    The main aim of the apprenticeship levy is to support employers in growing the number and quality of apprenticeships in their own workforce.

    However, the UK Government understood that some employers wanted to use funds in their digital account to pay for apprenticeship training of other employer’s apprentices, for example, someone in their supply chain.

    The UK Government subsequently made a change to the system to allow employers to pass 10% of the levy funds to another employer.

  • Are employers able to Pool funds in a digital account with other employers in a group structure?

    If employers are in a group of companies connected for the purposes of paying the levy, employers group will be able to collect their funds together into one digital account.

    Employers group will do this by registering to have multiple PAYE schemes attached to a single digital account.

    Since employers can only use funds in employers digital account to pay for apprenticeship training for employer’s own employees, employers that are not connected will not be able to pool funds in a digital account with exception of the ability to pass 10% to a supply chain.

  • How does the Levy apply to Apprenticeship Training Agencies?

    As an Apprenticeship Training Agency usually employs apprentices themselves, they will therefore be eligible to pay the levy (if their pay bill is above £3 million per year).

    This means they will be able to use funds in their own digital account to pay for training and assessment costs.

    Where do not pay the levy, they will be able to access support for training and assessment on the same basis as other employers who don’t pay the levy.

    The UK Government know that some employers will want to use the funds in their digital account to pay for training of apprentices employed by an.

    The UK Government will make an assessment of the pros and cons of any approach before providing further information in June.

  • What happens if an employer doesn’t pay the levy

    If employers do not pay the levy, employers won’t need to use the DAS to pay for apprenticeship training and assessment until at least 2019.

    When the UK Government ask employers to start using the levy/DAS to pay for apprenticeship training, The UK Government will help employers to prepare.

    When the new funding system began in April 2017, employers were able to choose the training employers’ like employer’s apprentices to receive fund an assessment organization using the registers available.

    The UK Government will ask employers to make a contribution to the cost of this training and government will pay the rest, up to the maximum amount of funding available for that apprenticeship these figures are currently 90% funded and 10% contribution however recently there is a suggestion that the 10% may be scrapped to help encourage the uptake of apprenticeships within SME employers

    Currently the UK Government will ask employers to pay this directly to the provider and employers will be able to spread it over the life time of the apprenticeship, to a schedule employer agree.

    As both employers and the government make a payment, The UK Government call this ‘co-investment’.

  • How do employers choose apprenticeship training I require?

    Employers will need to choose the training employers’ like employer’s apprentice to receive throughout their apprenticeship.

    Apprenticeship training can either be on a new apprenticeship standard, or on an existing apprenticeship framework however these are gradually being reduced.

    These are the 2 different types of apprenticeship training.

    Apprenticeship standards are the new type of apprenticeship developed by employers. Each standard covers a specific job role and sets out the core skills, knowledge and behaviors an apprentice will need to be fully competent in their job role and meet the needs of employers in the sector.

    Standards are developed by employer groups previously known as ‘trailblazers’.

    An apprenticeship framework ordinarily involves a series of work related vocational and professional qualifications, with workplace and classroom-based training. The UK Government will phase out frameworks between now and 2020, as The UK Government move over to the employer-led apprenticeship standards.

  • How do employers choose a training provider and an assessment organization?

    Employers will also need to choose a training provider or become an employer provider themselves

    If employers’ spending funds in employers digital account, or accessing funding through co-investment, employers can only spend it with an approved training provider or directly via employer provider status.

    All employers can access a register of approved training providers through the government website

    The site also provides details of approved assessment organizations. Employers are able to choose which employers want to assess employers apprentice.

    If employers are a levy paying employer, employers should consult with Interlearn about the consideration of becoming an employer provider and delivering skills via employer’s own team as we often see this gain the employer the greatest impact and ROI.

  • Are there additional considerations for Public sector employers choosing a training provider and an assessment organization?

    Public sector bodies will need to comply with Public Contracts Regulation 2015 when selecting a provider and an assessment organization from the approved registers.

    The however do not need to comply with Public Contracts Regulation 2015 should they become an employer provider

  • How do employers use funds in employers digital account to buy training – levy-paying employers

    When employers agree to buy apprenticeship training from a particular training provider or employers have become an employer provider and the apprenticeship has started, monthly payments will be automatically taken from employers digital account and sent to the provider or the employer. This spreads the cost over the lifetime of the apprenticeship.

    When employers buy apprenticeship training through the levy employers don’t need to have enough funds in employers digital account to cover the entire cost of the training at the start.

    As payments are taken from the digital account monthly, employers just need to have enough funds in employers account to cover the monthly cost of each apprenticeship employers have chosen.

    Employers will see funds entering employers digital account each month as employers pay the levy, and funds leaving the account regularly each month as employers pay for training.

    The UK Government makes sure employers payments reach the provider or back to employers in the instance employers are an employer provider.

    Since April 2017, these payments have been made monthly. In future, The UK Government aim to give employers more flexibility over the way payments leave employers digital account.

    If employers choose not to use employers digital account to buy apprenticeship training employers will need to buy it directly from a training provider, following the same process as employers who do not pay the levy.

  • How do employers buy training if employers don’t have enough in employers digital account – levy-paying employers

    If employers pay the levy, employers may find that over the course of an apprenticeship the funds in employers digital account aren’t enough to cover the full cost of the apprenticeship training and assessment employers’ like to buy.

    When this happens, employers will set a price with the training provider/employer provider and The UK Government will provide 90% by way of government support to help employers meet the additional costs.

    Support is available, up to the maximum amount of funding available for that apprenticeship for example in respect of leadership and management level 3 the government would support with up to £4500.00 and the remaining £500.00 would be made by way of co-investment.

    Employers will be asked to make this 10% contribution for the extra cost of training and to pay this directly to the provider in the instance that they are the employer provider they will simply account for this payment to themselves.

    Employers will be able to spread this contribution over the lifetime of the apprenticeship if they wish. As both employers and government make a payment, The UK Government call this ‘co-investment’.

    Once employers have decided to buy apprenticeship training:

    • funds will be taken from employers digital account each month to pay the training provider/employer provider
    • the provider will work out if the amount paid from employers digital account is less than 100% of the amount due that month
    • the provider will calculate how much more employers have to pay (using the rate set for employer co-investment) and agree with employers when employers will pay this
    • The UK Government will pay the government share direct to the provider/employer provider
    • The UK Government will ask the provider to confirm that employers have made employers contribution
  • What happens if I want to stop payments from employers digital account – levy-paying employers

    Employers should contact DAS to tell us to stop or pause payments, for example, if:

    • employers stop their training
    • employers take a break from training
    • employers haven’t received the service employers agreed with the provider/employer provider
  • What can employers spend apprenticeship funding on – all employers

    Funds in employers digital account, and funding provided by the government through co-investment, can only be used towards the costs of apprenticeship training and end point assessment as well as specific administration linked to the delivery.

    In respect of delivery this must be with an approved training provider and assessment organization however services defined as being third party services can be made by a provider not registered

    It can’t be used on other costs associated with employer’s apprentices or wider training effort.

    The UK Government has published a set of detailed funding rules that provide further information on exactly how apprenticeship funding can be used please contact the Episteme Team for further details

  • What is an apprenticeship?

    There are rules governing what an apprenticeship is. The main ones are:

    • the apprentice must be employed in a real job; they may be an existing employee or a new hire
    • the apprentice must work towards achieving an approved apprenticeship standard apprenticeship framework
    • the apprenticeship training must last at least 12 months

    However, employers need to consider that apprenticeships are now a fundamental method of training and upskilling new and existing members of staff regardless of their age and role, with the new release of standards new and exciting career paths have opened up and employers can use the system to pioneer new talent strategy’s

  • How are the funding training and assessment costs determined?

    Every apprenticeship standard and framework will be placed in a funding band.

    The funding band will set the maximum amount of funding that can be used towards training and assessment costs, over the length of each apprenticeship.

    The same funding bands will apply to all employers paying for apprenticeship training.

    Employers will be asked to negotiate and agree a price with the training provider employers have chosen from the approved register.

    This price will cover the delivery of apprenticeship training towards a specific standard or framework, and the cost of assessing the apprentice at the end of their apprenticeship as well as all the third-party administration linked to the course.

    Employers can use funds in employers digital account to pay employers training provider or themselves directly as employer providers, up to the maximum allowed by the relevant funding band.

    For example, the apprenticeship standard employers have chosen is in a funding band with a limit of £6,000 and employers negotiate a price of £5,000 with employers training provider.

    The UK Government will deduct this amount from employers digital account, in monthly instalments, over the life of the apprenticeship.

    If employers negotiate a price with a training provider that is more than the maximum allowed by the funding band, then employers must pay the difference between the band maximum and the agreed price, in full.

    Employers can’t make this payment from employers digital account.

    Employers that don’t pay the levy

    Employers will negotiate and agree a price with the training provider employers have chosen from the approved register.

    This price will cover the delivery of apprenticeship training towards a specific standard or framework, and the cost of assessing the apprentice at the end of their apprenticeship.

    Employers pay for this through co-investment with their provider.

    Co-investment means that employers and the government each pay some of the money to the provider.

    There will be a rate set each year, for the proportion of the money that employers need to pay and the proportion the government will pay.

    Employers payment plus the government contribution cannot total more than the maximum allowed by the funding band for the standard or framework employers have chosen.

    If employers negotiate a price with a provider that is more than the maximum allowed by the funding band, then employers must pay the difference between the band maximum and the agreed price, in full.

    Employers won’t get government support towards these costs.

    Extra support for employing 16 to 18-year-old apprentices – all employers

    When employers take on an apprentice who is between 16 and 18 years old at the start of their apprenticeship, employers will receive a payment to help meet the extra costs of employing them.

    This will be paid to employers through the training provider.

    Extra support for employing apprentices with additional needs – all employers

    To help meet extra costs, employers will receive the same payment as employers do when employers recruit a 16 to 18-year-old apprentice, if employers recruit:

    An apprentice who is between 19 and 24 years old and who has an Education and Health and Care Plan provided by the local authority

    A 19 to 24-year-old who has been in the care of the local authority

    If employers recruit an apprentice with additional learning needs such as dyslexia, other learning difficulties or disabilities,

    The UK Government will make a payment directly to the training provider to help them with the extra costs of supporting the apprentice’s learning.

  • Is there additional funding for English and Math’s training?

    Apprentices have to meet a minimum standard in both English and math’s up to Level 2.

    There are specific qualifications they must achieve. If employer’s apprentices don’t already have these, they may need to do an English or math’s course.

    Employers will need to work with employer’s provider or their own internal training team to identify which of employer’s apprentices require this training.

    The UK Government will pay providers or the employer directly, for the Level 1 and 2 English and math’s training they provide to employer’s apprentices. Employers won’t be asked to pay the training provider for it directly.

  • Who provides the training

    Employers can only spend the funds in employers digital account or access government support for apprenticeship training delivered by an approved training provider or if employers become an employer provider directly.

    Certain costs are deemed as third-party costs and therefore the supplier does not need to be on an approved training provider these are costs such as data management, end point assessment, quality assurance and materials.

  • What if an employer wants to become an employer training provider

    The UK Government recognize and encourages employers to become providers it also recognizes that they can be extremely successful training providers and The UK Government want to encourage those who want to take this route to deliver high-quality apprenticeships.

    If employers want to use funds in employers own digital account to pay for apprenticeship training that employers provide and manage employer’s self, employers will need to be an approved training provider via ROATP

    Interlearn specialize in providing back office support, infrastructure and consultancy to employers wishing to become employer providers and certain aspects and costs are deemed as third-party costs and therefore the can be paid for directly from the levy.

  • Who provides assessment – all employers

    Employers can only spend the funds in employers digital account or access government support to pay for approved assessment organizations that are listed on the Register of Apprenticeship Assessment Organizations.

    Organizations who wish to carry out end point assessments will need to show that they meet or exceed certain criteria.

  • Employers with operations across the UK

    Education and training is a devolved policy, which means that authorities in each of the UK nations manage their own apprenticeship program.

    For apprenticeships in England, employers will be entitled to funding as described here.

    The UK Government know that some employers have cross-border operations and training activity.

    The UK Government are working with the devolved administrations to make this work for employers.

    The UK Government have developed rules on which employees and training providers employers can use funds in employers digital account or government support to pay for.

    If employers would like more information about apprenticeship funding in another part of the UK, please contact their apprenticeship authority:

    • Scotland
    • Wales
    • Northern Ireland

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