Many employers will be paying additional sums by way of the apprenticeship levy that came into effect on 6 April 2017. Some savvy property sector employers will already be exploring ways in which these sums (plus more) can be recouped by their businesses.
Apprenticeships are perhaps more commonly thought about in some areas of the property sector than others, for example, in construction there have long been plumbers, bricklayers and electricians trained by way of an apprenticeship scheme.
However, there is a vast array of different types of apprenticeships that are relevant, from a lettings administrator to a plant mechanic and from a project manager to a building surveyor technician. Below we explore the mechanics of the levy and set out an action plan for employers.
Paying the levy
The levy is relevant to all employers, regardless of sector and irrespective of whether they have or intend to have any apprentices. However, depending on the area of specialism within the property sector, it may be that a business has a large workforce, making the levy even more relevant because the amount of tax is based on payroll costs.
The levy is 0.5% of the employer's total payroll bill. This is defined as being the total amount of employee earnings that are subject to Class 1 national insurance contributions, so that includes not just the employees' basic salary but also sums paid by way of bonus, commission, pension contributions and the like. However, employers that have a payroll bill of less than £3m will not need to pay anything because there is an allowance of £15,000 to offset. Note that connected employers share this allowance. There are very detailed rules on whether an employer is connected to another for these purposes.
To give a straightforward example of how the levy is calculated, let's say an employer (who has no connected employers) has an annual payroll bill of £3.5m. The levy payable will be £2,500 per annum (being 0.5% multiplied by £3.5m, less £15,000).
While the levy is an annual charge, employers are required to calculate and pay it on a monthly basis. It is paid via the employer's normal payroll process (just like income tax and national insurance are paid). The government will use the money received to help fund apprenticeship schemes.
Getting it back
Employers that pay the levy can clawback the amount paid by them, plus an additional top up of 10%, by opening a digital account with the Apprenticeship Service. Further government top ups may also be available in some circumstances, such as where an employer employs a 16- to 18-year old. As mentioned above, there are a vast number of relevant apprenticeship schemes out there for property sector employers.
The funds in the employer's digital account can only be used to pay for approved apprenticeship training and assessment for apprentices who work at least 50% of their time in England.
Also, employers should note that there are caps applied and if the actual cost of training or assessment goes over this amount, the employer has to pay the difference using their own money.
The employer's funds need to be used within 24 months of being deposited in the digital account or they will be returned to the government. If there is a group of employers, one account can be set up for the benefit of all.
It is perhaps also worth noting that even employers who do not need to pay the apprenticeship levy can claim funds from the government towards their costs.
Employing apprentices
An apprenticeship is a formal relationship where the individual undertakes a combination of work and training. In many cases, an apprentice must not only be given on-the-job training but spend a proportion of their time (usually around 20%) doing approved off-the-job training too. An apprenticeship trainer would usually provide this.
An apprentice is just like any other employee in many ways. However, they can sometimes benefit from additional rights, like enhanced dismissal protections, which prevent the employer from dismissing them unless there has been a major breach or some event that seriously undermines the employer's ability to teach them. It is therefore important for employers to correctly categorise and document the form of apprenticeship to ensure that such enhanced protections are not inadvertently granted – after all, you don't want to find yourself stuck with a problematic apprentice painter or the like that you can't get rid of.
Actions
The apprenticeship levy will be viewed by some employers as just another payroll tax. However, many others will use it as an opportunity to think creatively about their staffing structures to see whether apprenticeships can be incorporated or further developed, so that ultimately they can utilise the sums paid via the levy.
Action plan
- Check with your payroll team as to whether you are caught by the new levy rules.
- Assuming you are, consider whether you want to try and recoup all (or at least some) of this money by taking on an apprentice (or if you already have an apprentice, whether it can be used towards their costs).
- If so, open up your digital account and get your funds deposited.
- Then, if you are recruiting, decide on the type of apprenticeship that suits your business: a quantity surveyor, an estate agent or something else?
- Recruit your apprentice and ensure that you have appropriate documentation in place to protect your rights as an employer.
- Choose your apprenticeship trainer and agree a plan and price with them.
- Pay for the apprentice's training and assessment using the funds in your digital account. (Remember that you might need to top this up with your own money if the cost exceeds the funding cap or your account deposits are insufficient.)
- Monitor the situation because the amount you pay on a monthly basis may fluctuate over time.
This article first appeared in Estates Gazette, 22nd July 2017.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
