In his Autumn Statement and Spending Review, Chancellor George Osborne set the apprenticeship levy rate at 0.5% of an employer’s wage.
The new levy will be introduced in April 2017 and will be paid through PAYE. Each employer will receive an allowance of £15,000 to offset their levy payment.
The Levy will only be paid on a pay bill in excess of £3 million. In his speech, the Chancellor said the government believes this will mean that 98% of all employers will not pay the levy.
Anthony Thomas, chairman of the Low Incomes Tax Reform Group, said:
“We urge the Government to ensure the availability of the £15,000 allowance is as well publicised as possible and make it crystal clear to employers – particularly small employers such as care and support employers who, in our experience, struggle to keep up with constant changes to the requirements of running a payroll.”
Mark Beatson, chief economist for the CIPD, added that the levy could prove to be a double-edge sword:
“The new charge of 0.5% of payroll may improve the quality of apprenticeships but it could also squeeze out training opportunities for other sections of the workforce.”
Ian Cass, managing director of The Forum of Private Business, said:
“Details of the Apprenticeship levy does indicate it may hit our larger members and we will have to see what else is announced as someone has to fund the ambitious targets of improving the skills base”
However, Deborah Waddell, director of Confederation of British Industry – South West was more positive on the outcome:
“More positively, it is good to see the funds from the Levy will be ring-fenced for apprenticeships and calls for the creation of a levy board have been heard. This will give business a voice on how the money is spent and will work with the government to ensure a focus on quality.”