From 6 April 2016, over 750 businesses in the North East will be required to pay the apprenticeship levy into a digital account through the pay as you earn (PAYE) process.
The levy applies to companies with annual pay bills over £3m and is calculated on the entire pay bill at a rate of 0.5 per cent minus a levy allowance of £15,000. Employers in the North East will be able to use the digital vouchers to invest in existing and new talent to upskill their workforce.
The additional overhead, or tax, for businesses across the region may not be welcome, however it does present an opportunity to invest in local talent and tackle any skills gaps, particularly in the manufacturing, energy and technology sectors – helping to stimulate growth across the region.
In addition, employers that pay the apprenticeship levy in England will also receive a 10 per cent top-up from the government to their total monthly contributions which presents an additional incentive. So for every £1 an employer pays in, they can draw down £1.10 to spend on apprenticeship training through their apprenticeship account.
This only applies in England as Northern Ireland, Scotland and Wales have their own funding arrangements, so if a business has cross-border operations it will face different administrative systems.
Jackie Hall, RSM’s head of employment taxes for the North East and Yorkshire, said: ‘The new levy will transform how apprenticeship training is funded and delivered and with less than two weeks before implementation, businesses need to be ready to apply and administer the new measures.
‘It will be important to establish a robust system for doing so to take into account factors, such as pay rises, bonuses and national insurance contributions for employees turning 25 – this will enable a business to accurately calculate the levy charge. HMRC will monitor compliance via employers’ tax returns, and anti-avoidance provisions and penalties will be applied for late payment, reporting errors and not keeping adequate records.
‘Also, if employers don’t currently offer apprentice training then they need to implement measures to deliver this and recruit from the existing talent pool or appoint new apprentices. The funds will expire after 24 months so if the money is not invested in apprenticeship training it will be lost, so North East businesses need to ensure they maximise the benefits of the scheme or else they could miss out.’