It is a common theme that the UK has a huge Engineering skills shortage in the UK. Every year, the UK faces a shortfall of over 81,000 people with engineering skills in the workforce. As things stand, that means we need to double the number of entrants into engineering across all levels of qualification. In the energy & manufacturing sectors we face a particular challenge, because many of the most experienced engineers and scientists are set to retire in the coming years. In the background – key political trading conditions and the need for the UK to demonstrate its value as a high quality product provider.
The Apprenticeship levy
The Apprenticeship Levy was first announced by George Osborne in the November 2015 budget with a view to create 3 million apprentices by 2020. It is estimated that employers will pay in £2.6 billion into the pot that will fund the training of apprentices. The levy comes into play in May next year and will begin the process of approaching the skill gap. That said, the appeal of the engineering and manufacturing industry vs the software development/retail and more ‘glamourous’ industries will continue to be a challenge. How the Engineering/Manufacturing/Construction/Energy sectors markets itself will be key to its long-term success.
Who will pay the levy?
All employers in the UK with a payroll bill greater than £3m per year will have to pay the levy. The levy will apply to employers in all sectors – including those already covered by statutory levy arrangements (e.g. construction and engineering construction). If you already pay a levy, your industry training board (ITB) will consult with you on potential changes to your existing levy arrangements.
How much will I have to pay?
The levy will be charged at 0.5% of payroll. All employers will receive an allowance of £15,000 to offset against payment of the levy. So only employers with payroll bills greater than £3m will have to pay the levy. There will be a ‘connected persons’ rule, so if you operate multiple companies or payrolls, you will only be able to claim one allowance. You will be able to choose how to divide the allowance between the different connected companies. For the purposes of the levy, payroll will include all wages, bonuses, commissions and pension contributions on which NICs are due. In technical terms, payroll means the total earnings upon which Class 1 secondary NICs are paid. It will not include other payments such as benefits in kind.
How will the levy be collected?
The levy will be collected monthly through Pay As You Earn (PAYE) alongside Income Tax and National Insurance. Your £15,000 levy allowance will be translated into a monthly allowance of £1,250. If your levy liability in a given month is less than £1,250, you won’t have to make a levy payment that month. Any unused allowance will be carried forward into the following month(s) until you’ve used it. If the reverse is true, and you find that you have made levy payments, but not used all of your allowance you will be given a credit that you can offset against other PAYE liabilities. At the end of the tax year HRMC will operate a rebate system to make sure that you pay the right amount of levy.
For further information on how your business can benefit please feel free to contact Perpetual Partnerships or see the government website for instructions.