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Apprentice Levy Is Latest U.K. Payroll Tax

By William Kirwan

1499852517_fhh8paqnkpBusinesses operating in the U.K. need to be aware of a new apprenticeship levy that came into effect April 6, 2017. The tax is part of a government plan to improve vocational skills and increase the number of apprenticeships in the U.K.

This post summarizes the U.K. apprenticeship levy at a high level and should apply to all U.K. employers, though businesses operating in the U.K. should be mindful that Scotland, Wales and Northern Ireland have apprenticeship programs of their own.

The levy consists of a 0.5 percent payroll tax assessed on any organization with a payroll (effectively all payments attracting Class 1 National Insurance Contributions) of over £3 million ($3.76 million), or any group of connected companies with a total payroll over that threshold. If your company is part of a group that meets the requirement, you will need to share in payments, even if your own payroll is under £3 million. It’s up to individual business groups to decide how their payment shares will be divided.

The good news:

Employers also receive an annual allowance of £15,000 to offset payments. Groups of companies must also split this allowance.

If you pay the tax, you are eligible to create an online account enabling you to receive funds from the levy you pay towards apprentices’ training. The funds must be used to train apprentices using recognized providers. The funds cannot be used to pay apprentices’ wages, travel expenses, license fees or other expenses. Amounts withdrawn are subject to a maximum depending on the sector and type of apprenticeship. Apprentices must work in the U.K. at least 50 percent of the time.


For more on the worldwide movement to digitize tax collection, read the full blog article here.

Read an article on the importance of HR audits to foreign companies in Asia in this issue, also by Dezan Shira & Associates expert Adam Livermore.