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Business is struggling with the Apprenticeship Levy

Posted on September 29th, 2017

Too many businesses are struggling to understand the Government’s Apprenticeship Levy, according to research published this morning.

British Chambers of Commerce commissioned Middlesex University to find out whether businesses were making the most of the levy scheme, which was introduced for the start of the current financial year.

The levy is a tax businesses have to pay to fund new apprenticeships. It is set at 0.5% of payroll but an allowance, currently £15,000, means that only firms with payroll exceeding £3m a year have to pay into the fund.

But any firm wanting to recruit an apprentice has to be registered with the scheme, even if not paying into it.

What the researchers found was that 23% of levy-paying firms still had no understanding of it. That figure rose to 66% of non-levy-paying firms. And 15% of respondents said they didn’t expect to recover any of the added cost while 36% said they expected to recover all of it and possibly more.

Almost nine-out-of-ten (86%) of firms said the levy scheme had increased their overall costs.

Jane Gratton, Head of Business Environment and Skills at the British Chambers of Commerce, said: “For many businesses that pay the Apprenticeship Levy, it can feel like an additional employment tax, much of which they are unable to recover, and one that is deflecting training budgets away from other important training needs.

“Firms need greater flexibility on how they can use their levy monies and a system that is fully operational as quickly as possible, is simple and efficient, and that enables them to access good quality training.

“Our survey shows that many firms are still unaware of the Apprenticeship Levy and how it will impact on their business.

“With many companies across the country facing critical skills shortages, more information and support is required to ensure businesses continue to invest in training.”

Scott Knowles, Chief Executive at East Midlands Chamber, which is itself a levy-paying business and an apprenticeships provider, said: “Worryingly, what this research shows is that, at one end of the scale, there are firms paying additional costs for something they don’t understand and don’t ever expect to see a return for and, at the other end, the very firms which should be taking money out of the pot to fund apprenticeships seem to have no idea how it works.

“It seems that since implementing the levy, the Government has simply left firms to work out for themselves what they are supposed to do instead of making sure they fully understand it and how to maximise its potential.

“We have the expertise to help members make the most of the levy and, rather than ignore it, we would urge them to call us so that we can talk them through it.”

Workforce Survey - Apprenticeship Levy