From education to employment

HMRC investigations into Apprenticeship Levy more than double in a year

HMRC investigations into underpayment of Apprenticeship Levy more than double in a year to 84, with many businesses see the Apprenticeship Levy as an extra employment tax

The number of investigations launched by HMRC into the underpayment of the Apprenticeship Levy has more than doubled in a year to 84, up from 33 in 2017/18, says UHY Hacker Young, the national accountancy group.

HMRC collected an extra £6.2m through these investigations last year, up from £5.2m in 2017/18.

UHY Hacker Young says a growing number of businesses are finding the Apprenticeship Levy complex and difficult to comply with. This is leading to businesses underpaying which potentially leaves them exposed to substantial fines. 

The Institute of Directors has suggested that a lack of clear information on how to pay the Apprenticeship Levy and its rushed implementation in April 2017 may have created confusion amongst businesses.

Under the Apprenticeship Levy, any business with an annual payroll of more than £3m is required to pay 0.5% of its total wage bill – minus a £15,000 allowance – into a pool which it can then draw on to fund approved training schemes.

Many businesses see the Apprenticeship Levy as an extra employment tax with few expecting to recover the amount paid in. To recover this amount, businesses must use Government approved training programmes which may not fit their own requirements. 

The difficulty of using the scheme is demonstrated by new figures showing more than £3bn paid through the Apprenticeship Levy has yet to be drawn by businesses to fund training programmes. Only £480m has been used as of 30th November 2018.

The amount that HMRC suspects businesses to have underpaid through the Apprenticeship Levy was £13.6m in 2017/18. This suggests HMRC sees the Apprenticeship Levy as a potential risk area for underpaid tax and may further increase its compliance resources in this area.

Clive Gawthorpe, Partner at UHY Hacker Young, says: “The fiendishly complex Apprenticeship Levy is clearly causing problems for businesses.”

“The increase in investigations suggests that HMRC focused on larger businesses initially as the value of potential underpayment was higher and is now widening its net to smaller businesses too.”

“We have seen additional problems arise amongst large businesses where several different parts of the same businesses group may be liable to pay the Levy. However, there is little guidance to help businesses calculate their liabilities.”

“The high number of investigations HMRC is launching into underpayment is a symptom of the wider problems that are hampering the schemes effectiveness. These urgently need addressing.”

About The UHY Hacker Young Group: One of the UK’s Top 20 accountancy networks with more than 100 partners and 540 professional staff working from 23 locations around the country. The offices within the Group provide a wide range of accounting, tax and business advisory services, with a reputation for integrity and reliability within the financial community, and particularly with London’s Stock Markets. UHY Hacker Young are also ranked 14th in the ARL Corporate Advisers Rankings Guide amongst other UK audit firms for advising London Stock Exchange listed companies.

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