HMRC have published a new guidance manual covering the apprenticeship levy (“AL”). The manual also includes worked examples and supplements HMRC’s basic guidance in this area.

The AL came into operation on or after 6 April 2017 and applies to UK employers with an annual pay bill in excess of £3 million. The levy is charged at a rate of 0.5 percent on an employer’s annual pay bill.

The annual pay bill is all payments to employees that are subject to employer Class 1 secondary national insurance contributions, such as wages, bonuses and commissions. This includes payments to:

• all employees earning below the lower earnings limit and the secondary threshold
• employees under the age of 21
• apprentices under the age of 25

Though the AL is an annual charge per tax year, employers report this to HMRC via Real Time Information. The levy is paid each month together with the relevant PAYE and NIC liability.

Levy paying employers will start paying the levy from May 2017. The levy to pay in May will be calculated on the basis of the employer’s total pay bill for the previous tax month (April).

Employers are entitled to an annual apprenticeship levy allowance (“LA”) of £15,000. As 0.5 percent of £3m equals £15,000, there is no AL to pay where an employer’s pay bill is less than £3m, unless the employer is connected.