As an employer, you’ll have to pay the Apprenticeship Levy each month from the 6th April 2017 if you:
an annual pay bill of more than £3 million
- Are connected to other companies or charities for the Employment Allowance which in total have an annual pay bill of more than £3 million
Your annual pay bill is all payments to employees that are subject to employer Class 1 secondary National Insurance Contributions.
You must include payments to:
- All Employees earning below the LEL and Secondary Thresholds
- Employees under the age of 21
- Apprentices under the age of 25
Your pay bill doesn’t include:
- Earnings of Employees under 16
- Earnings of Employees who are not subject to UK NICs legislation
- Earnings on which Class 1A NICs are payable, such as benefits in kind
Employers who aren’t connected to another company or charity will have an Apprenticeship Levy Allowance of £15,000 each year. The allowance reduces the amount of Apprenticeship Levy you should pay by £15,000 across the year. This means that only employers with an annual pay bill of more than £3 million will pay the levy.
The Apprenticeship Levy is charged at 0.5% of your annual pay bill.
For the first month of the tax year this is calculated by:
1. Dividing your Apprenticeship Levy allowance by 12.
2. Subtracting this figure from 0.5% of your monthly pay bill.
For each of the following months it is calculated by:
1. Calculate your total pay bill for the year to date.
2. Add up your monthly levy allowances for the year to date.
3. Subtract your levy allowance for the year to date from 0.5% of your total pay bill for the year to date.
4. Subtract the amount of the levy you’ve paid in the year to date.
From 6th April you’ll need to tell the HMRC how much Apprenticeship Levy you owe each month
- From the start of the year IF your annual pay bill last tax year was more than £3 million or if you think your annual pay bill this tax year will be more than £3 million.
- If your annual pay bill unexpectedly increases to more than £3 million within the tax year you should start reporting this when it happens. You will need to monitor manually for this.
You report the Apprenticeship Levy each month using the Employer Payment Summary (EPS). Previously you would have only need to send an EPS if any statutory payments needed to be recovered but once set for the Apprenticeship Levy you will need to send an Employer Payment Summary each tax month – regardless of whether any levy payment is due.
As part of submitting the EPS the system will determine the total pay bill for the year to date (reading the FPS submissions for this PAYE reference), add up your monthly allowance relative to the current tax month, subtract the year to date levy amount from 0.5% of the total pay bill and then subtract the amount of the levy you’ve already paid in the year-to-date.
The calculated Apprenticeship Levy Due value should be paid to the HMRC as part of your normal monthly payment.
When calculating the Levy Due, variances in pay bills each month may mean that the Year to Date amount due reduces and the levy in the current month is negative. This amount can be offset against your monthly payment.
Payroll System Profiles
The Payroll System Profiles Payroll Options includes a parameter to report the Employer Apprenticeship Levy. You should set this if either of the above conditions are, or become, true.
The value of the Employer Annual Allowance will default to £15,000 with the Levy% defaulting to 0.5%.If under linked company/charity rules the value that can be applied to this PAYE reference is less than this then this value should be adjusted accordingly.
- Release ID: 7.0