Photo Caption: Tina Davies, Payroll Manager at Bevan & Buckland
With the new tax year swiftly approaching, talk once again turns to the changes that will soon come into effect. Established accountancy firm Bevan & Buckland makes it their business to keep up-to-date with the latest changes that organisations big and small will need to know about, and the Apprenticeship Levy is one new tax that is currently causing a stir within the business community.
Affecting businesses with a payroll bill of more than £3 million per annum, the Apprenticeship Levy is set to come into force in April 2017 as part of the government’s drive to train three million new apprentices by 2020.
“The levy has been put into place to help with the funding of apprenticeships. Under the levy, employers will be required to spend 0.5% of their total payroll bill on the levy. Whilst reporting and paying your levy to HM Revenue and Customs (HMRC) is simple – this is completed through the normal PAYE process by the 19th (or 22nd if paying electronically) of each month– the introduction of the ‘levy allowance’ has complicated things somewhat for the companies affected,” said Tina Davies, Payroll Manager at Bevan & Buckland.
There is a levy allowance of £15,000 so you will need to deduct that from your total. For example, if your payroll bill is £3,200,000 then 0.5% of this is £16,000. Less £15,000, and £1,000 is the amount that will need to be paid. Any Apprenticeship Levy payment that is made will also be allowable for Corporation Tax.
Tina added, “Your payroll bill is made up of all employee earnings that are subject to Class 1 National Insurance Contributions, so wages, bonuses, commissions and pension contributions are included. Other payments to employees, such as benefits in kind (company cars, health insurance, travel and entertainment expenses, and childcare), however would not be included. In addition to understanding how the levy works, how you will be affected and why it’s being introduced, it’s important to remember the changes when preparing your budget, particularly if you are using software to do so as the majority of large companies and multi-nationals do.”
Many providers are redeveloping their software due to the introduction of the Apprenticeship Levy. Sage is looking to make an allowance for the reporting of the levy in the year end update in March to April but are unable to give further details of what will be available at the moment.
“Groups of connected companies or charities should also be aware that only one levy allowance of £15,000 can be used per group, this allowance is then split between the payrolls. The definition of connected companies for this purpose is the same as the Employment Allowance. The levy allowance is set at the start of the tax year, and has to remain in place for the whole year. It cannot be changed unless a correction needs to be made because the £15,000 has been exceeded,” concluded Tina.