From 6th April 2017 a new levy was introduced by Government that requires some employers to make a monthly levy payment in order to fund the apprenticeship system. The key elements of the scheme are provided below:
- Each employer is required to pay a monthly levy payment through HMRC’s Pay As You Earn system equal to 0.5% of their payroll costs – the total amount of employee earnings subject to class 1 NICs.
- Each employer receives a £15,000 yearly levy allowance to offset against their levy bill.
- Therefore only employers with annual payroll costs of £3m or more are required to make levy payments.
- Any apprenticeship training or assessment costs can be offset against the levy payment due.
- The payments are administrated through a digital account. The account allows employers to use their credits to pay only accredited training providers and assessors registered to support apprenticeship programmes.
- The Government top-up any funds paid in to an employer’s digital account by 10%, meaning more funding is available to pay out for apprenticeship training than is put in.
To view an apprenticeship step-by-step guide for levy payers please click here.
Employers with payroll costs of less than £3m a year only need to pay at most 10% of total apprenticeship training and assessment costs. The other 90% or more is paid for by the Government.
Employers with fewer than 50 employees will have 100% of their apprenticeship training and assessment costs paid by the Government for:
- apprentices aged 16-18 or;
- apprentices aged 19-24 that were formerly in care or with a local authority education, health and care plan.
- The Government will pay employers of all sizes and training providers £1,000 each for apprentices aged 16-18 year and 19-24 (formerly in care).
- Employers are not required to pay National Insurance Contributions for apprentices under the age of 25 on earnings below the higher tax rate of £827 a week.
Funding band for the Motor Finance Specialist apprenticeship
- The Government has allocated the apprenticeship to funding band 8 which gives employers a maximum of £6,000 worth of credits (within their digital account) for off the job training and assessment of each apprentice.
- For apprentices aged 16-18 and 19-24 (formerly in care) an additional £2,000 will be provided by the Government which will give employers total available credits of £8,000 for each apprentice.
- Each employer can negotiate the cost of training with their chosen training provider to ensure the best value is obtained from the funding Government provide.
Apprenticeship funding transfers
Employers who pay the apprenticeship levy can now make a transfer to fund apprenticeships in another organisation. This potentially allows members to re-distribute their funding for apprenticeships to another employer.
How do transfers work?
- Employers who pay the levy can transfer a maximum of 10% of the annual funds in their apprenticeship service account, which is calculated from the total amount of levy declared during the previous tax year.
- Transfers can be made to any other employer. For the first phase, employers can make a transfer to one other employer, but as with all new functions on our service these will be reviewed based on user feedback.
- Employers can transfer funds to another employer to pay for the costs of training and assessment for their apprenticeships. These must be for apprenticeship standards such as the Motor Finance Specialist apprenticeship. Transfers cannot be used for the older apprenticeship frameworks.
- Apprenticeship funding is administrated through an online digital account that enables employers to view their credits of apprenticeship funding and pay training providers. The digital account has been modified to enable employers to view their transfers allowance and use a new transfers estimator tool to help them plan a transfer.
How would this apply to the motor finance industry?
The option to transfer 10% of annual funds could be useful to any employer that has spare apprenticeship funds. This would typically be where the employer has a large apprenticeship levy liability but is not employing enough apprentices to fully offset it.
For lenders it could provide an option to work with one particular dealer group or broker to help them upskill their staff through employing Motor Finance Specialist apprentices. It could also enable some businesses that form part of a larger group of companies to reduce their levy payments overall for the group, whilst at the same time providing a new apprenticeship recruitment channel for the receiving company. For example a finance company that forms part of a banking group or where the retail network and lender is part of the same manufacturer group.
To view more detailed government guidance on funding please click here.