What is the legislation behind the apprenticeship levy?

Written on: 30 October 2019

Written by: Freya King



The apprenticeship levy has been a fact of life for large businesses in the UK for over 2 years, but with many employers still choosing to write it off as a tax, it’s time to go back to basics. We hope that by understanding the thinking behind the levy, we can prevent more funds from going to waste.

The Richard Review

In 2012, Doug Richard’s independent report on apprenticeships set the wheels in motion for a range of government reforms. His recommendations included redefining apprenticeships to place greater importance on the outcome, with clear industry recognised standards for consistency. Richard also proposes incentives for apprenticeship training through government funding. It is this advice that formed the basis of a complete shake-up of the apprenticeship system.

Government implementation plan

In response to The Richard Review, the government published their own implementation plan in 2013, which contained bold pledges to modernise apprenticeships. The consultation included practical steps for improvements including higher expectations of English and Maths skills, a new grading system and an increased emphasis on assessment at the end of the apprenticeship.

Apprenticeship Standards

The levy isn’t the only major change the apprenticeship sector has seen over the last decade. To improve the quality and relevance of training, new apprenticeship standards were introduced with the aim of completely phasing out old apprenticeship frameworks. Developed by industry leading employers known as Trailblazers, standards are more challenging, detailed and job role specific. As per the implementation plan, a key feature of standards is the introduction of End Point Assessment.

Finance Act 2016

As part of the government’s promise to invest in skills, it committed to 3 million apprenticeship starts in England by 2020. The levy was introduced to help reach this goal and to encourage employers to play their part in bridging the skills gap.

While the levy was initially announced by the government in 2015, it didn’t become UK law until the Finance Act 2016. When it finally came into effect at the start of the 2017 tax year, hopes were high: the Department for Education projected that it would raise over £2 billion in the first 12 months alone.

Updates to policy

Unfortunately, the levy has not been as successful or well received as the government anticipated. Even though unused funds started to expire on a monthly rolling basis in May 2019, many employers remain reluctant to draw down their available funding for apprenticeships.

To combat this, the government introduced a transfer allowance to let employers share their funds. This was initially set at 10%, but it was later raised to 25% in April 2019. Despite these policy changes, the levy has attracted its fair share of criticism, with many calling for an overhaul of the whole system.

The long term ramifications of the levy remain to be seen, but one thing is for sure: apprenticeships are worth investing in. If you’re looking for advice on utilising your funds, get in touch.

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