4 January 2017, 17:48

Calling small and large charities: have your say on the Apprenticeship Levy

With the new year comes another consultation. This time on how large charities who will pay the Apprenticeship Levy will be able to transfer some of their levy funds to other employers (including small charities). This blog will take you through the current proposals to enable levy paying employers to transfer their funds and how you can feed into the consultation. If you are new to the Apprenticeship Levy below are some of the key things you need to know:

• From April 2017 employers with a pay bill of £3m and over will pay the levy at 0.5% of their payroll.
• Every employer subject to the levy will receive £15,000 to offset the levy. E.g. employer X has a payroll of £3.2m. The cost of the levy to them will be £16,000. Employer X will then receive £15,000 to offset this cost and so the total payable to the levy is £1,000. This levy – in the above example, £1000 – will be put into a new digital system called the Digital Account Service.
• The funds in the Digital Account Service will expire in 24 months after they enter the account unless the funds are spent. Whenever a payment is taken from a digital account, the service automatically uses the funds that entered the account first.
• Employers cannot use the levy to pay for the cost of salaries, recruitment or developing apprenticeships etc. It can only be used to cover costs of training.
• It will apply to all sectors, including public departments.

If you'd like to learn more you can access the current funding guidelines from the Department for Education as well as the following CFG blog posts:

1. What will the Apprenticeship Levy mean for charities? 
2. Apprenticeship Levy update: what charities need to know

What are the current plans to allow employers to transfer their levy funds?

As it currently stands charities paying the levy will be able to transfer up to 10% of the of the annual value of funds entering their digital accounts to other organisations. This facility will not be implemented until 2018 - as such employers paying the levy will only be able to spend the funds in their digital accounts on their own apprentices in the first year.

What have large charities said about the plans?

The current thinking from government is that employers that pay the levy will most likely want to transfer funds to smaller employers, or organisations in their supply chain. Engagement with our members suggests that levy paying charities will want to be able to transfer unspent levy funds in such a way that helps them to meet their charitable objectives. This could mean, therefore, that charities paying the levy may want to transfer unspent funds in their digital accounts to businesses or public sector bodies.

As an example:

Charity A's mission is to support young women into STEM careers. The charity employs some apprentices but not enough to spend the full amount in their Digital Account. The charity has explored opportunities to employ more apprentices but will still not be able to spend the full amount in their digital account. The charity has identified an engineering firm that is interested in employing more women apprentices - as this coincides with the charity's aim to encourage more women into STEM careers, the charity and the engineering firm discuss the possibility of the charity transferring it's funds to the firm's digital account.  

Whilst CFG is pleased that the Department for Education will allow employers to transfer funds, we believe and continue to push for charities to be allowed to redirect 100% of the funds in their digital account. Large charities required to pay the levy continue to report serious concerns in being able to spend their levy funds, something which CFG has highlighted repeatedly to Ministers.

How can non-levy paying charities benefit?

From 2018, small charities that are not required to pay the levy (i.e. have a pay bill of less than £3 million/year) but do employ apprentices may be able to receive some funding that they can use to cover the costs of training their apprentices from larger charities. The plan is that to receive this funding small charities will have to sign up to the Digital Account Service - if you want to be involved in user testing you can contact the government's Digital Account Service team.

How to feed into the consultation

CFG has consistently argued that as a major employer in the UK a, the voice of the charity sector needs to be heard when developing new employment-related policies. CFG now sits on the Department for Education's Transfers Working Group and will continue to represent the views and the best interests of the sector on this issue, but it is also important that individual charities submit their views and evidence to this consultation. NB the consultation is scheduled to close on Friday 6th January

• If you are a small/medium sized charity (fewer than 250 employees) you can submit your views via this survey. It is a short survey that should take no longer than 10 minutes - it seeks to ascertain how much small/medium sized employers know about the levy and whether an opportunity to have levy funds transferred to them is welcome.

• If you are a large charity (more than 250 employees) you can submit your views via this survey. The survey is relatively short and is your opportunity to call for greater flexibility in the rules and to emphasise the challenges that charities can face in spending their levy.

If you have any questions or thoughts please leave a comment below.

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