Around 320 businesses across the north of Scotland will start having to pay an apprenticeship levy from Thursday despite fears over a “lack of transparency”.
From 6 April 2016, over 240 Aberdeen businesses and a further 80 across the Highlands and Islands and Moray will be required to pay the apprenticeship levy through the pay as you earn (PAYE) process. The levy applies to companies with annual pay bills over £3million and is calculated on the entire pay bill at a rate of 0.5% minus a levy allowance of £15,000.
As training and apprenticeships are devolved to Scotland, the money raised will be passed back to the Scottish Government from Westminster as part of the block grant allocation under the Barnett formula. The Scottish Government will then invest this money on a national basis through organisations, including Skills Development Scotland, colleges and other initiatives, to help employers invest in training.
This differs north of the border as employers in England will pay into an online apprenticeship account and will be able to use the digital vouchers to invest in existing and new talent to upskill their workforce. If a business has cross-border operations it will face different administrative systems in England, Wales and Northern Ireland.
In addition, employers that pay the apprenticeship levy in England will also receive a 10% top-up from the government to their total monthly contributions which presents an additional incentive. So for every £1 an employer pays in, they can draw down £1.10 to spend on apprenticeship training through their apprenticeship account.
Campbell Reith, tax partner at RSM in Aberdeen, said: “The new levy will transform how apprenticeship training is funded and delivered and with only days before implementation, businesses need to be ready to apply and administer the new measures.
“However, many businesses and public sector organisations in Scotland have raised concerns about the approach as there seems to be a lack of transparency on how companies will directly access their contribution. Without further clarity, the additional overhead, or tax, may not be welcome. However, if businesses are able to engage with the national initiatives it could present an opportunity to invest in local talent and tackle any skills gaps.
“Regardless of views for or against the scheme, the measures will come in this week so it is important to establish a robust system to take into account factors, such as pay rises, bonuses and national insurance contributions for employees turning 25 – this will enable a business to accurately calculate the levy charge. HMRC will monitor compliance via employers’ tax returns, and anti-avoidance provisions and penalties will be applied for late payment, reporting errors and not keeping adequate records.”
A Scottish Government spokeswoman said: “The proceeds from the apprenticeship levy will largely be replacing existing funding and we have been clear that all of the funds raised through this new tax will be invested in skills, training and workforce development that will meet the needs of employers in Scotland.”
