Employers paying in to the Apprenticeship Levy are understandably keen to make sure they’re recouping their money, but much confusion still abounds in terms of what they can and can’t use their funds for.
In this guide, we’ll explore the ins and outs of how your Levy contributions can be spent, the time limits you have to spend them and highlight some complicating factors that have been the cause of common misconceptions among employers.
What can Apprenticeship Levy funds be spent on?
In very simple terms, the funds you pay into the Apprenticeship Levy (and the government’s corresponding 10 per cent top-up) can only be spent on costs associated with the training and assessment of your apprentice – be they an existing employee or new member of staff.
The same criteria applies for non-levy payers (and those who’ve used up all the funds in their ASA) taking advantage of the government’s co-investment scheme (where you pay 10% towards training costs and the government makes up the other 90%).
These funds are all sorted in your Apprenticeship Service account (ASA) and can be directed to training providers listed on the official register to cover training and end point assessment (EPA) costs for a staff member undergoing apprenticeship-based training on an approved course.
However, it’s important to note that these can’t be the same organisation and you’ll need to source both your training and EPA organisation separately.
Unlike current apprenticeship training, which is restricted based on criteria like age and pre-existing qualifications, the raft of changes coming in April 2017 will do away with eligibility requirements – making it easier than ever to use apprenticeship-based training for existing staff.
Extra funding, like grants for those taking on young people, aren’t subject to the same restrictions and can be used to support apprentices in any way employers see fit.
What can’t you spend your Apprenticeship Levy funds on?
Funds can’t be spent on any training that’s not apprenticeship based, nor can it be used to cover the costs of:
- Travel subsidiaries
- Work placements
- Licenses needed to practice
- Setting up an apprenticeship programme within your organisation.
You can also only use Levy funds (and co-investment) for training for employees based in England undertaking an English apprenticeship (as opposed to those run under Welsh, Scottish or Northern Irish schemes).
Employees who live in devolved UK nations, but whose place of work is in England (as determined by HMRC), are also eligible, provided they’re being put on an standard that’s approved in England.
Levy-paying organisations with significant numbers of employees in devolved nations will get something of a raw deal. Since the Levy is a tax, it applies on a country-wide basis, however, because apprenticeships are part of a devolved skills policy, they won’t be able to reclaim the money they spend (or get a 10% top-up from the government) on their workforce in Scotland, Wales and Northern Ireland.
Apprenticeship Levy allowances
Every Levy-paying organisation also qualifies for a £15,000 training allowance, which works in much the same way as a personal tax allowance.
This means that only organisations with an annual pay bill of more than £3 million will have to pay anything (although those with varying pay bills may pay the Levy in some months and not others).
As explored in our guide for group organisations, companies that are connected in terms of tax will only get one allowance to use between them, although there is some flexibility in how this can be deployed.
Deadlines for spending your Apprenticeship Levy funds
Once the funds enter your ASA, you’ll have 24 months in which to direct the money to appropriate providers for use. If you don’t use them within this period, they’ll simply be removed from your account and put into the general pot – which essentially means you’ll be paying someone else’s training costs.
The ins and outs of Apprenticeship Levy finance can often be a source of confusion, so if you’ve got any questions about the topics we’ve covered in this guide, be sure to get in touch via Twitter or LinkedIn.
And if you’re looking for bespoke advice on upskilling your existing employees or taking on new apprentices, don’t hesitate to get in touch with our team of Levy experts or read our free Apprenticeship Levy guide: