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Apprenticeship Levy - implications for groups of companies

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11 February 2016

HMRC has released draft legislation for the new Apprenticeship Levy which is due to come in from April 2017.  Based on the initial drafting, there appears to be wider consequences for groups of care companies than anticipated which would leave many being subject to the new levy.

The Apprenticeship Levy will be charged at 0.5% of the employers total payroll bill, with a Levy Allowance of £15,000 available to offset against this.  The initial view, therefore, was that any employers with a payroll bill of less than £3 million would not be affected by the new rules.

The legislation, however, as currently drafted provides that, for groups of companies, only one company will be eligible to receive the Levy Allowance.  The group can elect which company receives the allowance but there does not appear to be any provision to transfer any excess allowance to other group companies.

So, take an example of a group with two companies, each having a payroll of £1 million.  Logic would state that there is no apprenticeship levy, as the payroll will be less than £3 million for the group.  However, you have to elect which company receives the £15,000 with no ability to transfer the excess.  Therefore the “unelected” company, on the basis of draft legislation, will be subject to the levy at 0.5%, i.e. £5,000.

Conversely, if the group had all of its employees in one company, with a total payroll of £2 million, there would be no apprenticeship levy due.

This was not what was anticipated, given that the Government stated it would only affect the top 2% of payrolls.  If the rules stand as drafted we would expect all groups of companies to be subject to the levy to some degree, where they have employees in two or more of those companies.

HMRC are welcoming comments on the draft legislation until 2 March 2016 and we expect that there will be many responses opposing the rules as drafted.

If you would like to understand how you might be affected by the new rules, please do get in touch with Andy Brookes on 01242 237661 or andy.brookes@hazlewoods.co.uk

Andrew Brookes - Partner and Head of Healthcare
Andrew Brookes
Partner and Head of Healthcare Contact details