When the levies break

7 March 2017

This April sees the imposition of two additional levies on employers, which may go down like, erm, a Led Zeppelin.

The first of these is the Apprenticeship Levy, which is aimed at larger employers and is charged at 0.5% of an employer’s total wage bill. Rather than being the whole of gross earnings paid to all employees, there are a few exceptions, being those employees in respect of whom no National Insurance is payable. That’s not those employees in respect of whom NI is chargeable at 0%, but those who are outside the scope of NI, such as those working abroad or under-16s. Also the value of benefits in kind on which Class 1A NI is calculated are not included in the Apprenticeship Levy calculation. However, payments that are subject to the new off-payroll working in the public sector rules are included in the total wage bill figure.

Each employer or group of employers is given an annual allowance of £15,000, meaning that those with payrolls less than £3 million will not suffer the levy. However, this will be a lower figure if employers are connected with one another and members of such groups of employers will be able to agree between them how the annual allowance will be allocated at the start of the relevant tax year. Where an employer commences or ceases part-way through a tax year, a full year’s allowance will be available.

Businesses that arguably already do their bit for training, like those which pay the CITB levy, will not be exempted from the Apprenticeship Levy.

The second levy to come along in April is the Immigration Skills Charge, which seems to be an imposition in tune with the spirit of the age. It’s a charge made in respect of skilled workers from outside the European Economic Area that are employed in the UK. The rules are quite complex and are less likely to affect the average employer than the Apprenticeship Levy, but annual charges of £1,000 per employee can be levied. Small companies – those that are so defined by Companies Act limits – and charities have the charge limited to £364 per annum. A formal sponsorship application has to be made to the Home Office for this type of worker and it’s at this stage that the levy becomes due.

If you need help in understanding or implementing the new levies, please contact your usual UHY adviser at your nearest location or complete our online contact form.