Investigations into apprenticeship levy underpayments double

The number of investigations launched by HMRC into the underpayment of the apprenticeship levy has more than doubled in a year to 84, up from 33 in 2017/18, according to analysis by UHY Hacker Young

HMRC collected £6.2m through these investigations last year, an increase from £5.2m in 2017/18.

Under the rules, any business with an annual payroll of more than £3m is required to pay 0.5% of its total wage into a pool which it can then draw on to fund approved training schemes.

UHY Hacker Young says many businesses see the apprenticeship levy as an extra employment tax with few expecting to recover the amount paid in. To recover this amount, businesses must use government approved training programmes which may not fit their own requirements.

Research has shown that more than £3bn of funding has yet to be taken up, with HMRC data suggesting only £480m had been used as of 30 November 2018.

A City and Guilds survey at the beginning of the year found that of the 745 levy-paying companies polled, 92% reported they would like to greater flexibility in spending the funds, with 45% saying they wanted to allocate the funds to non-apprenticeship training courses.

In addition, 95% said they had failed to spend their apprenticeship budget in the first 12 months of the new system.

The amount that HMRC suspects businesses to have underpaid through the apprenticeship levy was £13.6m in 2017/18.

Clive Gawthorpe, partner at UHY Hacker Young, said: ‘The fiendishly complex apprenticeship levy is clearly causing problems for businesses.

‘The increase in investigations suggests that HMRC focused on larger businesses initially as the value of potential underpayment was higher and is now widening its net to smaller businesses too.

‘We have seen additional problems arise amongst large businesses where several different parts of the same businesses group may be liable to pay the levy. However, there is little guidance to help businesses calculate their liabilities.

‘The high number of investigations HMRC is launching into underpayment is a symptom of the wider problems that are hampering the schemes effectiveness. These urgently need addressing.’

Report Pat Sweet

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