Apprenticeship levy – recent changes to unused levy contributions

Since 6 April 2017, employers with annual payroll costs over £3million have had to pay HM Revenue and Customs (HMRC) an apprenticeship levy of 0.5% of gross pay (subject to £15k credit) via the payroll process.

These contributions accumulate monthly in the employer’s levy ‘pot’ and are used to fund the cost of apprenticeship training within a 24-month period. However, any unused balance older than 24 months (on a rolling basis) is unfortunately wasted.

If an employer is subject to the levy but doesn’t train apprentices, they can’t utilise the funds directly, but they can transfer part of their levy pot to another (potentially unrelated) employer who can use it. If this is not done, the levy pot is simply wasted. With effect from April 2019, HMRC has increased the amount that can be transferred between employers from 10% to 25%.

The key details

Employers that send and receive funds need to know that:

• funds are paid monthly for the duration of the apprenticeship
• only levy-paying employers can make a transfer
• any employer can receive, and use transferred funds
• sending and receiving employers must be registered on the apprenticeship service
• a transfer can only be used to pay for training and assessment for apprenticeship standards
• transfers can only be used for new starters

Employers who are transferring funds

Before you make a transfer from your apprenticeship account, make sure that you:

• have enough funds to transfer to another employer
• have a clear understanding of the forecasted cost to you, which will cover the duration of the apprenticeship you’ve agreed to fund through a transfer
• understand you will be funding the total cost of their apprenticeship and not just the co-investment
• agree with the employer who is receiving the transfer, details of the apprenticeships you’re funding
• are aware of the funding rules around transferring apprenticeship funds

You should also know:

• you can’t transfer funds to another employer if you currently receive a transfer
• if you’re currently transferring funds to another employer, you can’t receive transferred funds to pay for your apprenticeships
• transfer payments will leave your apprenticeship service account first, each month
• if the apprenticeship stops, your transfer payments will stop as well

Employers who want to receive a transfer

If you want to receive a transfer from another employer, you must be aware of the following:

• you can only use the transferred funds for apprenticeship training and assessment
• transferred funds can only be used for apprenticeship standards
• you’ll need to create an account on the apprenticeship service to receive the transfer and pay for apprenticeship training
• you’ll need to sign an agreement with the Education and Skills Funding Agency (ESFA)
• transfer payments will be made monthly from the sending employer to your apprenticeship account
• if the apprenticeship stops then the funding will stop too
• you won’t have to pay any funds back to the sending employer
• if the employer sending you funds runs out of funds, you must make a 5% contribution to the cost of apprenticeship training and the government will pay the remaining 95% (this is called co-investment)
• a transfer can fund up to the funding band maximum of a standard, if the cost of training is more, you’ll have to pay the difference to the training provider
• if a training provider transfers funds to you, they cannot deliver the training for that funded apprenticeship

To find out more about transferring unused levy contributions to another employer, please get in touch with your usual Gerald Edelman contact or contact Engin Zekia at ezekia@geraldedelman.com or on 020 8492 5670. Alternatively, if you’d like to learn more about outsourced payroll support for your business, then check out our payroll services.