Apprenticeship levy – English account

Levy-paying businesses finally have the option of transferring funds to another organisation

From April 2018, employers who pay the apprenticeship levy will be able to transfer apprenticeship funds to other organisations. There are restrictions meaning that levy-paying employers can transfer a maximum of 10% of annual funds. This is the total amount of levy declared, with the English percentage applied plus the 10% government top-up payment.

The question that needs to be considered is how easy and cost-effective the transfer will be for those passing across funds and those receiving funds. Clearly, the recipient will need to consider if they would benefit financially or if they would benefit by having other training opened up to them. Currently, they simply pay 10% of the cost of apprenticeship training.

There are a number of conditions that apply, some less time-consuming than others, and many would be required under the current framework.

The requirement to check if state aid has been received will be a simple exercise for most businesses. The guidance highlights that ‘10% of all the funds you receive as a transfer from another employer count as state aid.’ Recipients are advised to check that the amount of state aid already received in any three-year period does not go over the €200,000 limit.

The European Commission considers that public funding to a single recipient of up to €200,000 over a three-year fiscal period has a negligible impact on trade and competition, and does not require notification. There is a duty on the grant recipient to keep track of the total funds granted under these terms for the last three fiscal years.

The most common examples of state aid are government grants, loans, guarantees (for example, the Enterprise Finance Guarantee) and enhanced capital allowances (for example, relief for SMEs on the cost of research and development).

The Finance Act 2016 permits the publication of specific information about businesses that are beneficiaries of state aid tax reliefs.

Those transferring the funds (levy-paying employers) can transfer to:

  • employers in their supply chain
  • employers in their industry
  • support an apprenticeship training agency
  • work with regional partners.

The guidance states that ‘any employer can receive and use transferred funds, but they have to be registered on the apprenticeship service’. The levy-paying business is obviously registered but the recipient business will also need to register. Registration requires the Government Gateway login details for the business’s PAYE scheme(s).

The employer receiving the funds will also need to sign an agreement with the Education and Skills Funding Agency (ESFA), and agree that if the provider of the funds ‘runs out of funds’, they will revert back to the standard apprenticeship model where they make a 10% contribution to the cost of apprenticeship training and the government will pay the remaining 90%. Many of the details regarding the transfer were unavailable at the time of writing – for example, the agreement with the ESFA.

As employers with apprentices will know, training providers are required to enter into a contract/agreement with employers. Training provider guidance states that the training provider shall:

  • ‘enter into a contract for services with each employer for which it will deliver training to apprentices in accordance with the requirements set out in the funding rules
  • deliver training to apprentices in accordance with its contract for services with the employer and the requirements set out in the funding rules
  • have and maintain a clear feedback and complaints policy for all employers using its services
  • assist and cooperate with both the employer and the ESFA in relation to the delivery of training to apprentices.’

Those employers who are transferring funds are reminded that, where they are transferring funding from their levy account, the total cost of the apprenticeship will be taken from their account.

Levy-paying businesses, as previously highlighted in Accounting and Business, can retain funds in their levy account for a period of 24 months. They may also wish to account for the levy usage in their financial statements by only writing off what is used if they intend to use the remainder.

ACCA will provide further updates and guidance for transferors and recipients of these transfers.

More guidance is available from the Department for Education and the Education and Skills Funding Agency. You can also find out more about ACCA apprenticeships.