More clarity needed on Levy, say business and charities

The government is facing renewed calls for clarity over the apprentice levy, set to come into force in April 2017. And the need for information is growing greater, as both the private and charity sector are struggling to plan for the new levy.

Firstly, The British Institute of Facilities Management and the Engineering Employers’ Federation are among those to have expressed concern about the scheme’s design, and have questioned how it will be administered. The British Chambers of Commerce have added to their voices, with acting DG Adam Marshall very vocal on business’ concerns.

“There are a number of problems with the apprenticeship levy,” he said. “First, it was announced before it was fully cooked. Businesses were told, “You have to do payroll tax, but we’re not sure how it’s going to work yet, so stay tuned”. That went down very poorly, as might be expected.

‘The fact that the threshold for the levy is at £3 million of pay bill affects a lot more smaller businesses than people may think.

‘The Department for Business can trot out all of the statistics that it wants about it only affecting 2 per cent of businesses, but when you represent the kinds of firms I do, a lot of them will have a pay bill above £3 million. They will be severely affected by this and they’re now having to make very tough choices.’

 

‘Rock and a hard place’

Meanwhile, the charitable sector is also questioning how they will be affected by the introduction of the levy. Anjelica Finnegan, senior policy officer at the Charity Finance Group, a membership organisation for charities, said 1,200 charities would have to pay a collective £70m into the levy pot.

“We just feel like we’re stuck between a rock and a hard place where we’re going to have this payroll tax that we’re not going to be able to use, and I can’t imagine donors being particularly happy about that,” she told the Financial Times.

The CFG’s key concern centres on how the levy will affect their costs: under the current plans, the levy will provide organisations with vouchers worth the same amount of money as they pay in the levy, but will not cover other costs involved with employing apprentices – principally salaries. Charities say they will struggle to recoup the money because they do not have the capacity to recruit and pay apprentices: they tend to rely on volunteers to keep down administration costs.

FD of Oxfam Alison Hopkinson, was one lending her voice to the sector’s discontent, saying, “We’re concerned that the current narrow definition of apprenticeships would exclude the work we do supporting some of the UK’s poorest and most marginalised people to build up basic skills and confidence, helping to prepare them for the workplace.”

In response, Nick Boles, the skills minister, said: “All employers in England who are eligible to pay the new apprenticeship levy will be able to get back more than they put in. What’s more, research shows that for many, the cost of apprenticeship training pays for itself within one or two years.

“The levy will create life-changing opportunities for millions of people while ensuring businesses, the public sector and charities have the skills they need to be more productive and innovative in the future. We have worked with hundreds of employers to design the system around their needs.”