- March 11, 2016
- Posted by: Laura
What is the levy about and who will pay?
The new Apprenticeships Levy will be introduced in April 2017. The rate will be 0.5% of an employer’s pay bill and will be collected by PAYE, based on total employee earnings.
All employers in England, Scotland and Wales with a wage bill over £3 million will pay the Levy. Employers in England will be able to reclaim their contributions through a new digital voucher system, which can be used to pay for the training costs of an apprenticeship. If employers do not use the funds in their digital accounts, Government will make this available to other employers.
The vast majority of smaller firms will be out of scope of the new levy but there is no detail yet on whether vouchers could be passed on by larger employers to smaller firms. The Government has not yet confirmed the funding arrangements for the training costs of apprentices taken on by smaller firms outside the new levy.
What about the devolved nations?
The Apprenticeships Levy will apply to employers across the whole UK. However, only employers in England will receive funds via their digital account to pay for apprenticeships training.
Because skills policy is devolved to Scotland, Wales and Northern Ireland, the voucher system will not apply there. The Government has said the nations will receive their ‘fair share’, but how this will work has not yet been confirmed.
How does it affect the existing CITB levy?
On current estimates, there are some 700 current CITB levy payers who will be in scope to the new Apprenticeships Levy. But of course the impact is of concern to construction employers of all sizes.
In autumn 2015, IFF consulting surveyed 100 of the largest UK construction firms — those most likely in scope to the new levy. Nine in ten employers supported the CITB Levy/Grant system, and a majority believe that without CITB, training levels and quality would fall.
The majority of large employers who felt able to express a view (59%) preferred a ‘hybrid model’ – that is, to pay a reduced CITB levy alongside the new Apprenticeships Levy (with modified CITB service levels).
In light of the new Levy, CITB will consult with industry and bring forward new proposals for the industry levy in the first half of 2016, with the sector going into the CITB consensus process later this year. We don’t know what the proposals will look like until we have more detail from Government on the new Apprenticeships Levy and how it will work.
The Government has repeatedly said it is willing to find a way for the two levy systems to coexist. CITB is working closely with BIS on this, although we are awaiting detail on a number of key points – like funding arrangements for smaller firms, if vouchers are transferrable, etc.
Any changes to the existing construction levy and to the CITB grants scheme should follow these principles:
- Must be administratively simple
- Fair both to employers paying the Apprenticeship Levy, and those only paying the CITB Levy
- Respect that employers paying the Apprenticeship Levy will want to keep their overall contributions close to current levels
- Compatible with the Government’s reforms to apprenticeships funding