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Gearing up for the apprenticeship levy

Q: In preparation for the apprenticeship levy in April, what are the key steps I need to take to ensure my business is ready?  

A: While most businesses are aware that the apprenticeship levy is being introduced in April, some employers may not yet have taken steps to plan for this requirement. There are important areas that employers should be reviewing and assessing now to enable the levy to be positively and successfully used in their business.    

The first step is to assess whether the company is caught by the legal obligation to pay the levy. Only employers with an annual pay bill of more than £3m a year, or connected to a group of companies with a total annual pay bill of this amount, will meet the requirement. The annual pay bill is calculated by totalling all payments that are subject to Class 1 employer National Insurance contributions and includes bonus and commission amounts. Employers will have to pay the levy amount if they think their annual pay bill will exceed £3m. If, at a future date, the threshold is not reached then a refund can be received. 

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Employers also need to review their payroll systems to ensure they are capable of calculating, reporting and paying the apprenticeship levy through the normal PAYE system. It is likely that payroll staff will also need training on how they should be carrying this out to ensure the employer’s legal obligation is met. 

Before starting to pay the levy, employers should be researching apprenticeship providers and schemes to assess where they want to spend their funds. This is not likely to be a quick decision as introducing an apprenticeship scheme into a business can take many months to plan and implement. Employers should identify the areas of the business that need apprentices or will benefit from the introduction of a learning and training scheme. There are two years to use funds from the date they enter the levy account before they expire, so employers have time to choose how they apply their funds.

In advance of the first levy payment, employers can register for a new apprenticeship service account. This is a necessary administrative step that needs to happen, so employers should sign up for their account during the last few weeks before the requirement is introduced. This will then be one thing checked off the list before the law takes effect on 6 April 2017.

Peter Done is managing director of law firm Peninsula