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The Apprenticeship Levy – One Year On

It has been a year since the Apprenticeship Levy came into force throughout the United Kingdom. Since 6th April 2017 businesses with an annual payroll over £3 million have contributed 0.5% of their wage bill into an apprenticeship fund each month, offset by an annual allowance of £15,000.

The Levy has been introduced to help the Government reach its target of creating 3 million quality apprenticeships by 2020. In addition, employers with a wage bill less than £3 million will contribute just 10% towards the cost of training an apprentice, with the Government ‘co-investing’ the remaining 90% (up to a funding band maximum).

Organisations subject to the Levy are reminded that the money paid in, along with a 10% supplement from the Government, must be used within 24 months. Therefore, it should be viewed as a “use it or lose it” fund.

Whilst businesses have been paying the Levy, using the funding has not been as straightforward as expected. The funds can only be used for certified apprenticeships up to a funding band maximum. For training that costs more than the funding band maximum, companies have to pay the difference from their own budget. This means that organisations may not be able to access more advanced apprenticeships and restricts them to specific training programmes. Consequently, the Apprenticeship Levy could be regarded by some as an extra tax because businesses have been unable to use the money for their current established training plans.

In fact, figures released from the Department for Education in January 2018 show that apprenticeship starts for the first quarter after the Levy was introduced fell almost 60% compared with the year before. However, during the following quarter this fall reduced to 27%.

If your business has been struggling with the implications of the Apprenticeship Levy, then Cirrus Purchasing can help. To discover how we could help ease the impact of the Apprenticeship Levy on your business, including the provision of advice and support for clients to identify opportunities for cost savings, please visit our Services page or contact a member of the consultancy team.

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