Andy Sanford, Partner at leading tax and advisory firm Blick Rothenberg

With growing rates of unemployment amongst the young the Government should urgently revise the apprentice Levy which is so complicated that most companies don’t use it. 

 

Between May and December 2019, some £401 million of apprenticeship funding was not used by companies and returned to government coffers. This  should now be used to help the young unemployed.

At a time when there are high rates of unemployment amongst the young, with the pandemic  disproportionately affecting their work prospects, it is plainly wrong that such a staggering amount of potential funding is not being used and helping young people who are crying out for help.

Providing appropriate training has been made harder due to the Pandemic and these funds will just expire. The  Government has trumpeted  the Kickstart Scheme for 16-to-24-year olds, but done very little to address the expired levy funds

The Apprentice Levy is a tax equating to 0.5% of gross salaries (For those companies with wage bills greater than £3,000,000), which is then put into an Employer Pot. If the employer does not use the funds on applicable training within 24 Months, the money returns to the government. Small companies do not have to pay into the pot but can access funding for apprenticeships.

The problem is that small companies have been restricted in claiming the levy due to the onerous regulation surrounding the administering of the scheme. The requirements for 20% study leave, is not practical for a number of jobs where on the job training is the best form of learning. Larger companies, whilst able to cope with the regulations, have also found it difficult to meet the 20% threshold.

The apprentice levy is only for those under the age of 25. The advantage of an Apprenticeship is that it offers employment, and employers are best placed to identify where the real need is for new skills.

Employers are desperate for change to the levy rules. Key changes should be:

  • The government should have far more flexibility on the required level of training. In some industries the rate should go down to as low as10% where working on the job is the best form of learning.
  • There should be renewed marketing by the Government to advise small businesses how they can access the levy effectively.
  • The documentary requirements for the small employer in implementing the scheme should be reduced.

The apprentice levy was never intended to be a tax, but it is now clear that it is a significant tax raising measure, which is now indirectly funding other publicised initiatives, at a time when the 18-25-year-old age are suffering huge employment problems as a result of the pandemic.

Andy Sanford, Partner at leading tax and advisory firm Blick Rothenberg

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