On 6 April 2017 the apprenticeship levy came into force throughout the UK. This is effectively a new tax of 0.5% on all employers’ (both private and public) pay bills to the extent that they exceed the threshold of £3 million in the relevant tax year.
The collection of the levy will be administered by HMRC and is a matter reserved to the UK Government. Separate arrangements as to what will be done with the money raised will exist in England, Wales, Scotland and Northern Ireland. Early indications suggest that there will be no benefit to the Northern Ireland Executive. It is this which led Simon Hamilton (who prior to the recent collapse of the power-sharing executive was the Minister for the Economy) to state that the levy is “bad news” for Northern Ireland.
In England the money will be used to create a new digital apprenticeship service account. With this a 10% top-up will be applied, meaning that for every £1 that enters the digital account, the employer will receive £1.10. The employer will then be able to use this money to select and pay government-approved training providers. This gives English employers both an incentive to use the funds and also a degree of control over how best to spend the money.
However, Northern Ireland receives its funding through a block grant and cannot directly control what is done with the money raised by the levy. It has been calculated that there will be no benefit to the Northern Ireland Executive as a result of the levy. Simply put, businesses in Northern Ireland that pay the levy receive nothing and it is effectively an additional tax on large businesses.
Feedback from local businesses arising from consultations with the Department for the Economy has raised a number of issues and concerns, including:
- The extra cost and cash flow issues caused by the levy.
- The fact that the public sector accounts for a disproportionately high level of employment in Northern Ireland.
- The perception that employers in England are getting a better deal.
- The concern that Northern Ireland will be less attractive to foreign investors as a result of the levy.
- Concerns from employers, particularly in the construction industry, who already contribute into an existing levy scheme such as the CITB levy.
- The concern that young talented people may move to England to take advantage of increased apprenticeship opportunities there.
- The fact that certain industries do not necessarily lend themselves to apprenticeship programmes.
- The confusion that faces employers who are based in multiple regions of the UK and who will need to understand the regional differences.
Some have called for the funds raised by the levy to be ring-fenced so that the money will go to encourage apprenticeships, as was the original intention of the scheme. Indeed the previous Minister for Employment and Learning (the now defunct department that used to have responsibility for this area) had favoured a ring-fencing of the funds. There has not been any indication that this will be done. Any clarification for businesses is unlikely to come in the near future, given that Northern Ireland is currently without a government.
Businesses in Northern Ireland already make use of apprentices through the existing programmes, such as the “Training for Success” programme and Apprenticeships NI. Indeed the Department for the Economy has claimed that as at April 2016 there were 13,357 apprentices in Northern Ireland. Local businesses will be looking for urgent clarification one way or the other as to what the future of apprenticeships in Northern Ireland will be.
