In the Spending Review and Autumn Statement, Osborne confirmed that the treasury will be collecting close to £12 billion from large employers between 2017-2021, which works out at around £3 billion a year.
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A NEW apprenticeship levy will come into effect in April 2017 to fund the government’s target of creating 3 million apprentices by 2020. In the last parliament, 2.4 million apprenticeships were delivered by the government. A £15,000 allowance for employers will mean that the levy will only be paid on employers’ pay bills over £3m.
The levy is expected to raise £3bn a year in the United Kingdom by 2019/20.
Fewer than two per cent of United Kingdom employers will pay the levy.
The extension of the small business rate relief scheme could help remove one barrier to entry for many would-be recruitment entrepreneurs, and with apprenticeship funding to double by 2020 there is the opportunity to encourage more young people to consider a career in recruitment.
That’s more than if Osborne had raised corporation tax by almost four per cent, according to Sky’s economics editor Ed Conway.
It will advise on the level of levy funding each apprenticeship should receive. However, smaller companies who make less then £3m will not pay the levy.
In addition to increasing spending, the government will establish a new employer-led body called the Institute for Apprenticeships that will set apprenticeship standards and quality.
Funding caps will be significantly higher for programmes which have high costs and are of high quality.
“Unless larger businesses can reap the benefits of apprenticeships in other parts of their supply chain, this will simply be a payroll tax for them”.
But business groups have described the levy as a new “payroll tax”. “In particular, digital and STEM skills, which will be vital for the improvements in productivity we desperately need as a nation, have to be much more widely embedded into every company in the United Kingdom”, he said.
“There’s a sting in the tail [of the budget] in the size and scope of the Apprenticeship Levy”.
Segal does hold some reservations towards the levy, fearing that small and medium-sized businesses could be affected by the tax.
EEF the manufacturers’ organisation chief executive Terry Scuoler chief executive said: “The chancellor’s enthusiasm for an industrial strategy for Britain is hugely welcome, as is his promise to continue to support Catapult centres, the successful incubators of new business ideas and product development“.
Another director-general, Simon Walker of the IoD, has reservations as to how the apprenticeship levy will be implemented.
This means that the levy will only be paid on any paybill in excess of £3m and that less than 2% of United Kingdom employers will pay it. The levy will be paid through Pay As You Earn.
“Coupled with the continued rhetoric on avoidance, multinationals may well question whether the United Kingdom will remain a tax friendly environment in the years to come”, concluded Todd”.
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He said that while employers are committed to tackling the skills shortage and apprenticeships would help in that aim, the focus needs to be on quality training, not just the race to reach the targeted three million apprenticeship starts.
