PwC on getting the BEST out of the apprenticeship levy

Over 6 years since the introduction of the levy, many employers are still yet to fully embrace the opportunities the levy offers.

In its simplest terms, employers have been paying 0.5% of their pay bill above £3m, which is then accessible for approved training apprenticeships. If the pay bill is below £3m they won’t pay in, but can access funding from the government for qualifying apprenticeships.

Co-investment funding is now 95% from the government towards qualifying apprenticeship costs.

Impact for group companies

We've seen a sharp focus from HMRC on groups who operate multiple PAYE references, be they different autonomous businesses in a group, as a result of acquisitions, various payrolls or PAYE references for different staff groups etc. This focus has an aim, which is to check that businesses are paying their full levy. It sounds simple - 0.5% of the paybill over £3m, but the complexity is around apportioning the pre-£3m limit allowance (£15k across the group) and only claiming ONCE. We have seen an uptick in activity and correspondence from HMRC to groups to review their position as HMRC has identified the allowance being claimed multiple times or no levy being paid through some PAYE references or payrolls.

Two key considerations jump out:

• If that allowance has been claimed multiple times the back paid value can add up (£45k per entity or allowance overclaimed for the last 3 closed tax years over which the levy has been in place); and
• If HMRC see a group getting a relatively simple admin process wrong, it may flag for an enquiry into what else isn't working in payroll and ultimately impact the group's risk rating with HMRC.

Don't forget the Employment Allowance and changes from 6 April 2020

For the period up to 5 April 2020 the group rules for the Employment Allowance were the same i.e. only one per group - so it’s certainly worth checking at the same time as looking at the application of the Apprenticeship Levy Allowance. In addition, from 6 April 2020 groups with an NIC bill over £100k should not be claiming the Employment Allowance, so it’s vital to check and again non-compliance is simple to miss and can add up across multiple entities in large and complex groups.

"Use it or lose it"

There is often a disconnect between those responsible for paying the Levy (tax / payroll) and those responsible for learning and development (HR), apprenticeships not only develop a specialist skill set, but also the attitudes & behaviours required by employers. A mindset shift needs to happen to get the most out of this for everyone.

Suggested actions

• Allowances - Make sure the levy has been correctly accounted for and paid - particular challenges around groups of companies and multiple PAYE references or payroll providers (who might automatically claim the allowance) and Appendix 7A schemes (run as a separate PAYE reference) have led to some employers over- or under- claiming.
• Look at what is available - is there a pot available, how much, when does it expire?
• Workforce uses - Consider which parts of their workforce could benefit in terms of training and skills, from recruitment through to retention and leadership pipelines, even if the employer hasn’t been paying in. And is there a group wide use for pooling resources?
• Transfers - With the “use it or lose it approach”, if they are unable to utilise all of the funds, think about sharing 25% with the supply chain.
• Wider uses of funds - Consider the broader uses of the levy, e.g. Gender Pay Gap reporting has highlighted a lack of female representation at certain grades - could the levy be used as a tool for retention or to support women returning to work after maternity leave or a career break?
• Consider the August 2022 reduction in the 20% "off the job" training requirement to six hours per week, and whether this opens up further skills and training opportunities for your people.

PwC National Apprenticeship Week Seminar

PwC’s upcoming Apprenticeships seminar being held at their Embankment offices in London on Wednesday 8th February. There is little doubt that apprenticeships play a hugely important role in transforming the life chances of millions and are a crucial tool to unleash the full productivity potential of the UK economy. PwC are proud to be supporting and hosting a seminar during National Apprenticeship Week (6th to 12th February 2023).

Their seminar gives an opportunity for employers and stakeholders to engage on how best apprenticeships are supporting their growth ambitions, along with the day to day operation of the Levy and the online Apprenticeship Service.

They will also be welcoming their Chair and Senior Partner, Kevin Ellis, to open the event and talk about PwC’s own approach to learning and commitment to social mobility. Kevin will be joined by guest speakers from HMRC’s Apprenticeship Levy team and Conveya, providing their expertise around our early career talent solutions..

Interested in attending? Contact us at info@conveya.co to find out more about the event or reserve a free spot.

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