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Apprenticeship Levy – new guidance for connected companies

A new ‘apprenticeship levy’ is due to come in from April 2017 and after a consultation, two rounds of draft legislation and two sets of guidance, it appears that HMRC have finally listened to concerns for connected companies. 


The apprenticeship levy will be charged at 0.5% of the employer’s total payroll bill, with a levy allowance of £15,000 available to offset against this. This should mean that an employer’s payroll bill would need to exceed £3 million before the levy becomes payable.

Original proposals

Prior to the latest guidance, both versions of the draft legislation had provided that, for connected companies, only one company would be eligible to receive the levy allowance. There were no provisions to transfer any unutilised allowance, meaning that groups with payroll bills of less than £3 million could have been subject to the levy.

The latest

Under recently published guidance, HMRC have confirmed that an amendment will be made to Finance Bill 2016, such that connected companies can allocate the £15,000 allowance to more than one company. 

This allocation must be determined at the start of the tax year (e.g. by 6 April 2017 for 2017/18).  The proportion of allowance allocated to each connected company will remain fixed for that tax year and cannot be amended.  Although this is not as helpful as allocating on a real time basis, and some foresight will be required, in most cases it should result in connected companies being able to utilise the full £15,000 allowance.

This amendment will put connected companies on a level playing field with bigger standalone companies, as both should now only be subject to the apprenticeship levy at the point their payroll bill exceeds £3 million.

Multiple payrolls

HMRC have also confirmed in the guidance that where one employer operates multiple payrolls, and have not utilised the full £15,000 allowance against their main payroll in the year, any unutilised amount can be offset against other PAYE schemes at the end of the tax year.   

What’s next?

We are now awaiting the updated legislation, to confirm that it reflects the latest guidance.