Apprenticeship levy set out in Autumn Statement

18 December, 2015

The government has laid out its plans for an apprenticeship levy that will result in businesses paying an additional £11.6 billion in tax over the next five years.

The new levy will impose a 0.5 per cent tax on employment costs to help pay for three million apprenticeships over the course of the current Parliament.

The new tax will only affect around businesses with annual wage bills of more than £3 million, who account for two per cent of the UK’s businesses, meaning most employers will be exempt from the apprenticeship levy.

George Osborne said in his Autumn Statement that companies paying the new tax will be able to “get out more than they put in” by employing apprentices.

However, this claim has been attacked by a number of business groups, which claim that employers are already struggling to cope with the impact of the National Living Wage, which comes into force next year.

Carolyn Fairbairn, the new director-general of the CBI, called the apprenticeship levy a “sting in the tail” of the Spending Review for employers, said: “It is a significant extra payroll tax on business and by widening the net it will now catch smaller firms. You only need to have 100 to 150 staff on minimum wage, so quite a few small firms will be caught by this.”

She has been joined by Robert Chote, chairman of the Office of Budget Responsibility, who said: “The apprenticeship levy behaves like a payroll tax, so we assume that the costs are passed on into lower profits and – primarily – lower wages.

“This reduces earnings growth later in the forecast. Bear in mind that this comes on top of the higher minimum wage and auto-enrolment into pension saving, which also increase business costs.”

Whilst most small to medium sized enterprises will not be affected by the new levy, its introduction could have a wider impact on the UK’s business community as a whole.

In some cases it may even help SMEs with the recruitment of new apprentices, so it is important that you are aware of the changes and what they will mean for your business.

Our team at Watson Buckle can help you review your businesses wage bill to ensure you are compliant with the latest changes. They can also help you access the fund to take advantage of the new opportunities to hire apprentices. To find out more, please contact us.