10 January 2017 weekly update

Dear Colleagues

Happy New Year.

Welcome back to the new school term after what I hope was a relaxing Christmas break.

The Apprenticeship Levy

The Apprenticeship Levy is a new Government initiative aimed at increasing the level of investment in apprenticeships by encouraging employers to invest in apprenticeship programmes and to raise additional funds to improve the quality and quantity of apprenticeship training.

All Community and Voluntary Controlled maintained schools, and VA, Foundation and Academy schools with payrolls over £3m, will need to pay the Levy from 1 April 2017.

The new scheme starts from 1 April 2017 and is payable by all large businesses, including schools, with a wage bill in excess of £3m per annum. This is not the only criteria so please read on if you are a maintained Community or Voluntary Controlled school.

The Levy is calculated at a rate of 0.5% of employer’s earnings which are subject to Class 1 secondary National Insurance Contributions (NICs). This includes wages, bonuses, commissions and pension contributions. This does not include other payments such as benefits in kind and expenses that are subject to Class 1A NICs.

The 0.5% Levy will be paid into a digital account and the Government will top up the funds in the digital account by 10%. Each employer will have a separate digital account. The digital account will hold the employers’ funds (including 10% government top up) and the funds will enable the employer to recruit apprentices, and pay providers for their training and assessments.

The funding can be used for apprenticeship training from an approved provider on the approved framework and the assessment from an approved provider. It cannot be used to cover any other costs such as wages or travel or recruitment.

There is a time limit on the use of the funds in the digital account. Funds will be available in the digital account for a period of 24 months calculated on first in first out basis. After 24 months any unused funds will be redirected by Government.

Will my school have to pay the levy?

For the purpose of calculating the Apprenticeship Levy there are two categories of schools:

1. Community and Voluntary Controlled Local Authority (LA) maintained schools

   For this category of school, the employer is considered to be the local authority and so for the purpose of the Levy calculation the schools are included. This means any school in this category will be liable to pay the Levy, regardless of whether they use the Schools Personnel Services for payroll services. This is because this category of school is considered connected to the LA, and as such the total wage bill is significantly in excess of the £3m threshold.

2. Voluntary Aided (VA) and Foundation maintained schools and Academies including Multi Academy Trusts

   For this category of school, the employer is considered to be the governing body or academy trust. Each school in this category must assess their annual wage bill to determine if they are required to pay the Levy, and act accordingly.

If you do not run your own payroll, you may not have your own unique PAYE reference. If this is the case, the VA or Foundation school will need to ensure that it is set up as a separate employer with HMRC with a different number to the LA.

VA and Foundation schools that need to set up a new PAYE scheme will need to set it up between 6 and 28 February 2017. Your payroll provider should be contacting you separately about this.

Community and Voluntary Controlled schools will have to make provision for the relevant cost of the Levy in their individual budgets, in the same way as other payroll costs e.g. National Insurance.

The DfE does not intend to allow the Schools Budget to be top-sliced by the LA for the Levy.

Therefore all Community and Voluntary Controlled maintained schools, and VA, Foundation and Academy schools with payrolls over £3m, will need to ensure they have taken account of this additional cost when they set their budgets for 2017-18.

Accessing the Levy from the digital account

Each employer will have access to the digital account to enable apprentices to be recorded and payments tracked and made. If you fall under the LA umbrella then the digital account will contain pooled funds from all the connected parties. Exactly how connected schools will be able to access the LA digital account is still to be decided.

The LA will issue further guidance to schools including utilising the funds once a response has been received from the latest consultation and the digital account is live online.

Non-levy paying schools can still participate in the Apprenticeship Levy scheme. If an employer has not paid the levy and would like to train an apprentice, they “co-invest” 10% of the cost of the apprenticeship training and assessment and benefit from government funding to cover the remaining 90% if the cost.

Further Advice

Schools Financial Services will advise on how to include this additional cost to your 2017-18 and future years’ budgets during Budget Setting training and in their guidance notes.

In addition to this article, the DfE have recently published a briefing paper for schools which can be accessed here

For further advice about the budget and paying the levy please contact the Schools Financial Services Manager, Yvonne.King@kent.gov.uk.

For advice and support in employing and training an apprentice please contact Sue.Dunn@kent.gov.uk, Head of Skills and Employability.

Clearly it is in the interests of schools that pay the level to draw down the money to support the training and support of staff employed as apprentices.

Patrick Leeson, Corporate Director Education and Young People’s Services