Earlier this month, HMRC published a policy paper on the Apprenticeship Levy, as well as the draft legislation for its implementation.

As expected the levy will be charged on paybills of employers’ at a rate of 0.5%. The levy will be payable through Pay As You Earn (PAYE) alongside income tax and National Insurance. To keep the process as simple as possible, “paybill” will be based on total employee earnings subject to Class 1 secondary NICs. We are seeking confirmation about the treatment of overseas payroll costs and would welcome additional feedback from members on how PAYE and NICs is administered for these employees.

The Government has committed to keeping administration costs of the levy down, but there is recognition that there may be additional set-up costs faced by organisations (particularly those that do not run apprentice schemes currently); and it would be good if charities could keep a track of these costs throughout the implementation stage and let us know if they make running an apprenticeship scheme prohibitively expensive.

It has been confirmed that each employer will receive one annual allowance of £15,000 to offset against its levy payment. The legislation introduces a connected charities rule (which mirrors the test used for the Employment Allowance and the Gift Aid Small Donations Scheme) and where there are connected charities it appears that only one of the charities (which can be nominated by the charity) will benefit from the allowance, with the others required to make a levy contribution. If you think you charity may be caught by the connected charities rules, please let us know ASAP.

We await further details from Government about the exact scope and definition of “apprentices”, the requirements to become a registered training provider, how charities can use their levy contribution and other issues relating to VAT costs and grant-making charities.