Spending Apprenticeship Levy funds

This section is relevant to organisations with employees working in England. For information about how the Levy will affect the devolved administrations, click here.

Once they have been paid to HMRC via PAYE, Apprenticeship Levy contributions will be returned to the employer the following month via their apprenticeship service account, for which organisations can register here.

The amount to be returned to the employer will relate to the proportion of employees on the paybill who live in England – that is, whose home address HMRC has recorded as being in England. Each employer will also benefit from a 10% Government top-up on this amount. Considering, for example, an organisation with a paybill of £5m, which has 80% of its employees living in England:

  • Annual levy payment: £10,000
  • Monthly levy payment: £10,000/12 = £833.33
  • Proportion to enter DAS account: 80% of £833.33 = £666.66
  • Funds available for the month: £666.66 + 10% top-up = £733.33

On top of these funds, it will be possible for employers to earn additional funds from the Government for focusing on certain priority areas – namely young apprentices or those with an Education, Health and Care plan. More information on these additional funds can be found in the Department for Education policy paper on apprenticeship funding.

Employers will then be able to use the funds in their apprenticeship service to pay for approved apprenticeship training for employees whose workplace is in England – that is, the physical place of work in which the apprentice will spend 50% of their time or more is in England.

Employers will need to agree on a training package with an apprenticeship provider (or may consider becoming apprenticeship providers themselves), with each apprenticeship fund or scheme falling into one of 15 funding bands, the upper limits of which range from £1,500 to £27,000. This upper limit represents the maximal amount of Levy funds that the employer may use from its account to spend on any one apprentice over the course of the apprenticeship. If the total amount agreed with the training provider is greater than the limit of the funding band into which the apprenticeship scheme falls, the employer will need to make up the difference directly to the training provider over the course of the apprenticeship. Detailed examples can be found in this technical funding guidance from the Skills Funding Agency.

Funds will be able to cover the costs of the apprentice’s training, including English and maths, assessment and certification. It will not be possible to use Levy funds to cover any other costs. Overheads, supervision costs and apprentices’ wages will not be funded by the Levy. The oldest funds in the account will always be spent first.

Employers will have 24 months in which to use their Apprenticeship Levy contributions (this was originally 18 months, but was increased following representations from CTG and others). Unspent contributions will be returned to HMRC for reallocation to other employers with the capacity for additional training.

The Government is also in the process of establishing a new independent Institute for Apprenticeships. It will regulate the quality of apprenticeships and will advise on setting funding caps, approving apprenticeship standards and assessment plans. It will be fully operational by April 2017.

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