Although the Apprenticeship Levy will not come into effect until April 2017, the initial legislative framework to introduce it is to be included in this year’s Finance Bill. A draft of that legislation has now been published for consultation, with comments requested by 2 March 2016. The draft answers some of the questions that are likely to have been in employers’ minds since last year’s Autumn Statement, but there are still many areas which remain to be clarified over the coming 12 months.
Some key points from the draft legislation (and accompanying explanatory notes) are:
Definition of ‘pay bill’.
The draft legislation confirms the Government’s intention to use the National Insurance rules as the basis for calculating an employer’s pay bill. In broad terms a pay bill will include all amounts on which an employer pays Employer’s Class 1 NIC. Significantly, though, amounts on which no Employer’s Class 1 NICs are due because they:
- fall below the secondary threshold; or
- qualify for the zero rate applicable to under 21s or to apprentices under 25,
will also be included in the pay bill.
The legislation is drafted so that the Levy only becomes payable when the allowance is exceeded. There are provisions to prevent connected companies (again, the definition used is the one from the NICs legislation) and connected charities from benefitting from multiple allowances, and anti-avoidance measures intended to prevent any artificial inflation of the available allowance.
Payment and reporting mechanism
We already knew that the Government intended to collect the Levy through the PAYE system. The latest documents confirm that this means that the existing RTI system will be used, and that “the policy intention is that [employers] will calculate and pay the levy on a monthly basis”. The precise requirements, though, will be set out in regulations which are yet to be published.
Once more information is available, employers will need to ensure that their systems can make the correct reports and payments. The Tax Information and Impact Note (TIIN) accompanying the legislation states that, although the Government “wants this measure to be administratively simple” there will be “some impact on administration costs” for those employers paying the Levy. HMRC are to carry out further work with employers to assess the extent of this.
Time limits, penalties etc
In cases of non-compliance, the Levy will be subject to the same general time limits (for instance on HMRC assessments), penalties and appeal procedures as currently apply for income tax purposes.
Recovery from third parties
The legislation includes a provision which gives HMRC the power to recover unpaid Levy payments from a third party. Again, the detail will come at a later point in regulations, but the explanatory notes confirm that any such regulations would allow for the transfer of debt where “it is irrecoverable, for example from a managed service company”.
In summary, the draft legislation tells us more, but not everything. It is to be hoped that the detailed regulations, particularly around the reporting and payment requirements, are made available well in advance of the Levy coming into force, to allow both employers and software providers to prepare adequately.
The other big unknown is, of course, how employers will be able to access the funding to support their own training programmes. The Tax Information and Impact Note (TIIN) reiterates that “employers who are committed to training will be able to get out more than they pay”: we will need to wait, though, to see how this will be achieved.
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