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Apprenticeship levy may disadvantage smaller businesses

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The Chartered Institute of Taxation (CIOT) has urged the government to rethink its approach to the apprenticeship levy set to be introduced from April 2017. 

The tax body believes that in its current form the legislation may mean that many smaller businesses will be unable to take full advantage of the £15,000 allowance.

The levy will be charged on an employer’s pay bill at a rate of 0.5%, payable through PAYE alongside income tax and national insurance. If there are more employers within the business, their bills will be added together.

CIOT has questioned the fact that only 1 employer will be entitled to the levy allowance and any remaining allowance will not be transferred to the other employers in the business. 

This could potentially impact smaller businesses whose total pay bill exceeds £3 million, leading to them paying more levy than they would have done if they had employed workers through a single company.

Colin Ben-Nathan, chair of the CIOT Employment Taxes Sub-committee, said:

“We believe that this situation is unfair and that the levy allowance should be available for offset against the combined pay bills of all employers where aggregation applies. We would therefore urge the government to reconsider the approach on this point.

“It seems to us that a better option would be to adopt the same approach as for the employment allowance and allow the levy allowance to be claimed in full, up-front, so that the Apprenticeship Levy is only paid when the pay bill first exceeds £3 million.”

Talk to us today to find out more about the apprenticeship levy.