The Apprenticeship Levy and the Construction Sector Richard Nutt CITB Advisor

What is the Apprenticeship Levy? The UK Government has a target of creating 3 million apprenticeships in England during this Parliament. The Apprenticeship Levy will support this target. The levy will be 0.5% of their pay bill, paid through PAYE by UK employers across all sectors. It is scheduled to begin in April 2017. All companies receive an allowance of £15,000 on their levy liability across the year, meaning it is only charged on any pay bill over £3m. Claiming from the Levy: Employers in England who draw down funding from their digital accounts to pay for apprenticeship training will get a top up of 10%. Apprenticeship Levy vouchers only pay for the training element of an apprenticeship – not wages, travel, etc. Apprentices can be new hires or existing staff. Digital funds expire 18 months after they enter the employer’s account (first in, first out principle). The Apprenticeship Levy paid by larger employers will be placed into a Digital Account, to be used for funding apprenticeship training. 3m apps in England Levy paying firms will use the Digital Account system from 2017. Smaller employers will use the Digital Account from 2018. The funding system for small employers will not change until then. Levy paying employers who have used up their levy will pay 10% of any excess training costs, with the Government paying the remainder. Non-levy paying employers will be expected to pay 10% of training costs for their apprentices. Note: small firms (fewer than 50 employees) will not pay anything towards training apprentices aged 16-18 or those within Groups of companies 18 months to claim funds – first in, first out £3m allowance will be divided by 12 and allocated each month i.e. only monthly payroll over £250k will attract AL Levy raised on employees whose home address is in England will go into the Digital Account. Other levy funds will go into general taxation. The digital account can only be used to fund apprentices whose work address is in England. The devolved governments in Scotland, Wales and NI will receive additional funds in proportion to the amount spent on training in England. The levy is expected to raise £3bn a year by 2020. Money will be used to replace all current government funding provided by Skills Funding Agency (SFA) to pay for apprenticeship training provider costs Money will be converted into digital vouchers to pay providers for AL payers from April 2017 Employers will get a 10% top up on the Levy that is paid into their voucher account Expectation that employers will contribute to training: apprenticeships will be assigned a funding band of between £1500 and £27000, setting the maximum that digital vouchers and co-payment can be used to fund. Employers can pay for courses more expensive than this (if for example they offer bespoke training) but this excess will need to be 100% employer funded. Up to 10% of the value of digital vouchers can be passed on to other employers to fund apprenticeship training.

What is the CITB levy? The CITB levy collects contributions from construction employers and reinvests the money in the industry to fund training and skills development. In 2015: Grant collected: £182 million Benefits back to industry: £191 million Apprenticeships funded: over 20,000 Key differences from the Apprenticeships Levy: Supports firms of all sizes Applies only to construction sector Small firms may pay very little or nothing, but can still claim grants and funding System is agreed by industry consensus ‘vote’ every 3 years Supports apprenticeships AND other types of training Apprenticeship grants can support training costs or wages, staff time, etc. Applies across all 3 GB nations Grant paid out as a cash transaction Our priorities: Standards and Qualifications – helping industry develop the right standards to qualify the workforce Careers – bringing new people into the industry and helping existing workers progress Training & Development – understanding skills needs and ensuring the right training is in place

How will this impact on construction employers? Of the 70,000 construction firms registered with CITB, just under 600 will need to pay the Apprenticeship Levy. This will have important implications for the future of the CITB Levy. CITB will be shaping options this year for how its Levy can work alongside the Apprenticeship Levy in future, through an industry-led Levy Working Party. We will then formally consult with employers next year on a Levy Proposal for 2018 onwards. This means that for one year, some firms will have to pay both levies and we have consulted with Federations and employers how best to deal with this. For 2017/2018 we will introduce a 12-month Transition Package to support these employers through the CITB Grants Scheme. This will be an enhancement of up to 100% to the CITB grants they claim for training. It will be capped so that no employer receives more in enhanced grant than their Apprenticeship Levy bill. Can’t change the Levy without changing the legislation A one year arrangement whereby employers and groups of employers liable to the Apprenticeship Levy will receive additional training support via the enhancement of their standard Grant claims (excluding SUP) processed in the period 6th April 2017 to 5th April 2018 These employers/ groups will receive an enhancement of 100% of the Grants paid in the agreed period and will be paid in instalments throughout the year The enhancement amount will be capped to prevent employers/ groups from profiting from the arrangement. This cap will be based on a % (minimum of 100%) of the PAYE above £3m @ 0.5% as declared on the employer’s/ group’s 2016 Levy return(s) Package is not a direct repayment/ compensation of AL paid Package will only support AL payers who are engaged in training No additional claiming process for employers AL payers that are claiming little or no grant can increase the support they receive by conducting more training/ grant claiming CITB will support employers to optimise the support they can get from the package

What about firms outside the Apprenticeship Levy? Smaller firms who do not pay the new Apprenticeship Levy will be able to claim CITB grant funding as usual. We are funding the Transition Package through efficiency savings, so the overall pot of money available for smaller firms will not be reduced. Employers that do not pay the Apprenticeship Levy, or those who do but have used all the funds in their Digital Accounts, will need to pay 10% of the training costs, with the Government paying the remaining 90% - this is known as co-investment. There will be a £1000 incentive for employers taking on 16-18 year olds, and small firms (under 50 employees) will be exempted from co-investment for 16-18 year old apprentice training. Even before the Apprenticeship Levy was introduced, CITB had begun reforming its grants scheme to be easier to access and better focused on the most needed skills. This reform process will continue to make sure industry gets maximum value from the CITB Levy. Note: small firms (fewer than 50 employees) will not pay anything towards training apprentices aged 16-18 or those within

Consensus Timeline June – November 2016 - Levy options being considered with the Levy Working Party (LWP) December – March 2017 – Extensive Industry Consultation on Levy Options April – June 2017 – Consultation feedback used by LWP to narrow options to one proposal July – September 2017 – Formal Consensus process with Industry conducted October 2017 – Result of Consensus October – December 2017 (assuming Consensus achieved) – Work with BIS to draft 2018 Levy Order Early 2018 – Levy Order placed before Parliament Late March 2018 – First assessment raised under the 2018 Levy Order. Opportunity to develop a longer-term response to the introduction of the Apprenticeship Levy

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