HMRC has launched a two month technical consultation on the first set of draft regulations for the apprenticeship levy, due to be introduced in April 2017, with more information to follow later in the year
The current consultation asks for comments on the draft regulations made under the powers contained in the Finance Act 2016 to provide for the calculation, reporting and payment of the apprenticeship levy, and recovery of overpaid levy. These draft regulations also specify how the levy allowance will operate, on a monthly, cumulative basis.
The apprenticeship levy, first announced at summer Budget 2015, will be charged at a rate of 0.5% of an employer’s pay bill. Employers will receive an annual allowance of £15,000 to offset against their levy payment and this means that employers not subject to the rules around connection will only pay the levy if their pay bill exceeds £3m in a given year.
The rules on connected employers are drawn from those used in the employment allowance, with some modifications. These modifications set out that, though a connected group is able to receive the same amount of allowance as a single employer, that allowance can be split between the connected employers the way that those employers think is best, as long as the split does not mean that more than £15,000 is claimed.
The draft regulations state that employers with a pay bill of £2.8m or less for the previous tax year or who believe their pay bill will be less than £3m in the current year will not have to engage with the apprenticeship levy.
The levy will be reported through the PAYE process. The regulations confirm that the annual levy allowance will operate on a monthly cumulative basis, so the levy allowance will increase evenly throughout the year.
The draft regulations set out a number of specific requirements. Employers must assess their annual pay bill amount for the previous and current tax year to decide if they are liable for the levy; and make provision for the due date of the apprenticeship levy to be by the 19th (or 22nd if they report electronically) of the following month.
Employers are required to notify HMRC of the levy which is to be paid and make provision for the information which should be included in this return - the employer will use the Employers Payment Summary (EPS) to report their apprenticeship levy liability due to date and also the amount of annual levy allowance the employer may allocate to multiple PAYE references.
The requirements set out how to calculate the monthly levy allowance on a cumulative basis, in order to calculate levy liability - they also set out how to calculate levy liability both in the first month of the tax year, and in subsequent months.
Both single employers and those who are part of a group (company unit or charity unit, which has apportioned the £15,000 annual levy allowance across the unit) are able to apportion the annual levy allowance between multiple PAYE schemes. The regulations also make provision for recovery of overpaid levy by the employer.
HMRC says the intention is later in 2016 to make the full package of draft apprenticeship levy regulations available, which will cover other aspects such as assessment, repayment, recovery from third parties, and details of the records to be retained.
The technical consultation closes on 14 November.