Newsbite article

Complexities around the new Apprenticeship Levy

One thing is sure this summer – very few things in the political world have stood still and this has had inevitable knock-on effects across the great organ of Government.  August may see both Houses of Parliament in Recess, but Government continues.  

The critical changes, of course, are that we have a new Prime Minister, a new Cabinet and a new Frontbench.  As part of this there have been some important alterations to the structure and responsibilities of some government departments and which department is responsible for what.

One example of this that we very much welcome, is the move of responsibility for Apprenticeships from the now defunct Business Innovation and Skills Department (BIS) to the Department for Education (DfE).  BIS is transmogrifying into BEIS, Business, Enterprise and Industrial Strategy.

It is excellent news that Apprenticeships has Robert Halfon, MP for Harlow, as the new Minister as he employed the first parliamentary apprentice.

Since the flexibility of Apprenticeships has improved very much in line with business needs, an increasing number of building societies have launched or are planning to launch their own schemes to recruit, train and retain apprentices.  Generally, government attention and activity in this area has been helpful.

There is a BUT, and it relates to complexities surrounding the introduction of the Apprenticeship Levy which comes into effect next April and will see firms with staff costs of more than £3m pay an additional 0.5% ‘Apprenticeship levy’ as part of their Corporation Tax bill.  For firms with staff costs just above £3m the additional tax may be minimal, for larger firms we are talking hundreds of thousands or even millions.

Firms understand that the drive behind this additional tax is to encourage the recruitment of Apprentices, whether new into firms or existing employees gaining a significant new skill.  After all the Government has set itself a target of achieving 3 million new Apprentices by the end of the current Parliament in 2020.  

The encouragement comes from the fact that firms who pay the levy – and to a lesser degree those that don’t – can access the funds to pay for training for their apprentices.   Training that is beneficial to individuals and firms alike.

However, at this point, just 8 months before the start of the new tax-year and the introduction of the levy we are looking at a highly complex and little understood system for apprenticeships themselves, including a steady shift from Frameworks to Standards; confusion over how the funds can be reclaimed and what exactly they can be used for. 

Other uncertainties, which could well act as a brake on firms otherwise keen to push ahead with setting up apprenticeships, surround the need for currently approved training providers to reapply to be on the Register of Approved Training Providers.  The window for reapplication opens in October, so it is unlikely that the process will be complete before new year 2017 at the earliest.

The DfE asked for feedback earlier in August via a questionnaire.  The cut-off date for input is 5 September and the proposals and the questionnaire can be found here.  Any other feedback should be sent to apprenticeships.levy@bis.gsi.gov.uk    
 
Finally, but crucially, all of this relates only to apprenticeships for individuals whose primary place of work is in England.  The tax raising of the Apprenticeship Levy is at UK level, the decisions on how the funds so raised will be used sit with the devolved nations.  The Scottish Parliament has held a consultation and indicated that it may be minded to use the funds to provide training and skills more widely than apprenticeships.   We await views from the Welsh Assembly and Stormont.