Commenting on the Chancellor’s announcement today confirming that the Apprenticeship Levy will be set at a rate of 0.5% on an employer’s pay bill from April 2017, Mike Lavan, employment tax director at KPMG in the UK, said:
“The Levy will undoubtedly provide a welcome boost to youth training and employment, however will also represent an additional cost for many large employers. By 2020, it’s expected to yield over £3bn. Because each employer will receive an allowance of £15,000 to offset against the Levy, it will in practice only be paid by those employers with a pay bill in excess of £3 million per annum.
“Employment costs are already due to increase as a result of the introduction of the National Living Wage from April 2016, together with forthcoming increases to the National Minimum Wage. And the Apprentice Levy adds another payroll tax.
“In terms of the details, the Chancellor announced that the Levy would be at the rate of 0.5% which is in line with what had been expected. He also confirmed that it would be collected via the PAYE system.
“The Government’s response to the Apprenticeship Levy consultation provides some further detail, however there remain a number of points which will require clarification in the coming months. In particular, if a large employer elects to payroll benefits-in-kind under the new rules coming in from April 2016, would the reclassification of these benefits as earnings lead to a higher liability under the Levy?”
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