Employers are being warned to keep a close eye on their wages bills to ensure they stay the right side of the new Apprenticeship Levy.
Top 40 accountants Bishop Fleming have raised concerns that many employers who could be liable to pay the charge are unaware of how it works.
The Apprenticeship Levy began in April 2017 as a way of funding new apprenticeship opportunities across the UK. Employers who have to pay it are charged at a rate of half a per cent of their wages bill.
But employers don't have to pay the levy if their annual wages bill (worked out on a monthly basis) will be less than £3m, effectively an annual allowance of £15,000 (0.5% of £3m), or £1,250 per month on a cumulative basis. A group of companies have to share this threshold between them.
Bishop Fleming partner and Head of Payroll, Will Hanbury, is warning employers to closely monitor their wages bills as they go through the year, particularly if the pay bill is approaching the £3m mark.
Mr Hanbury explained: “Each month an employer now has to carry out an extra calculation: firstly working out the total wages bill for the year to date, and then deducting from 0.5% of that figure the levy allowance available to date, to see if any levy is payable.”
Mr Hanbury added: “The danger is that employers who think they do not have to pay the levy are not bothering to check. They need to do the numbers each month to confirm the position. The good news is that any unused allowance from earlier months can be carried forward to the next month in the same tax year, so it is not lost.”
The levy is collected via the PAYE system and is pooled into a fund available for apprenticeship training in England, accessible through a new Digital Apprenticeship Service account. Employers will need to register online their details and those of the apprentice to see how much funding is available.
The Treasury expects the levy to raise around £3bn a year to help fund 3 million apprenticeships by 2020. The charge applies whether or not an employer engages apprentices, or is already part of another apprenticeship scheme.
Mr. Hanbury also highlights a danger for academy schools that are caught by the new public sector off-payroll working rules introduced in April.
He explained: “Academy schools are part of the public sector, and since April this year any payments they make to individual contractors working through their own companies could now be treated as employee wages. If that is the case, this could push an academy's wage bill over the £3m mark and trigger the levy charge.”
Photograph: Will Hanbury, Partner, Bishop Fleming