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Firms hit by apprenticeship levy costs

Businesses remain in the dark about how to use the apprenticeship levy, 6 months after its introduction. The British Chambers of Commerce (BCC) polled more than 1,400 businesses and found 23% of levy-paying firms have no understanding of the apprenticeship levy or how to respond to it.

As of 6 April 2017, businesses with an annual pay bill of more than £3 million must pay the levy towards apprenticeship funding. The levy is charged at 0.5% of the annual pay bill. Each employer receives an allowance of £15,000 to offset against their levy payment.

Businesses with an annual pay bill of less than £3 million can also apply for apprenticeship funding – but 66% of firms did not try to access it. The apprenticeship levy represents an added cost for 56% of levy-paying businesses, who do not expect to recover all or a percentage of their costs from their £15,000 individual allowance.

Jane Gratton, head of business environment and skills at the BCC, said: “The apprenticeship levy can feel like an additional employment tax, much of which businesses are unable to recover, and one that is deflecting training budgets away from other important training needs.  Firms need greater flexibility on how they can use their levy payment and a system that is fully operational as quickly as possible, is simple and efficient, and enables them to access good quality training.”

Response to late MTD payment sanctions

The Chartered Institute of Taxation (CIOT) is calling on HMRC to allow taxpayers a limited number of defaults before incurring a late payment penalty under Making Tax Digital (MTD).

Most businesses, self-employed people and landlords will be required to use digital accounting software to keep and file tax records on a quarterly basis from next year.

The new system is set to roll out from April 2018 for those with an annual turnover exceeding the VAT threshold (£85,000).

Businesses with annual turnover below this threshold are exempt until April 2019, while those with a turnover of £10,000 or below are exempt from the changes.

In a consultation, HMRC set out 3 possible models to penalise late payments and submissions. It intends to implement 1 of the

following models:

Model A Points-based system where the individual would incur a penalty when a certain points threshold is reached.

Model B Automated review system looking over someone’s compliance with their submission obligations after a set period of time.

Model C Suspension of penalties where someone can avoid having to pay a penalty by provide a late submission.

Adrian Rudd, spokesperson at CIOT, said: “The suspension model most closely complies with HMRC’s penalty principles, which include that penalty regimes should be designed from the taxpayers’ perspective, primarily to encourage compliance and prevent non-compliance, and that penalties are not to be applied or seen to apply with the aim of raising money.”