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Apprenticeship levy criticised as stealth tax

View profile for James Champness

A key commitment within the Conservative Party’s general election manifesto of 2015 was to introduce an apprenticeship levy, funded by a 0.5% tax on the payroll of employers in excess of £3 million per year.  However, before the levy even comes into effect on 6 April, the plans have been criticised by the Institute of Directors as little more than a tax increase by stealth.  The criticism follows figures released by the Institute for Fiscal Studies (IFS), which estimate that the apprenticeship levy is due to generate up to £2.8 billion in 2019-20.  However, overall funding for apprenticeship schemes is only forecast to increase by £640 million over the same period.  Liberal Democrat peer Baron Foster echoed criticism of the way the levy is currently being implemented: “It’s time the government came clean and called the Apprenticeship Levy exactly what it is – another payroll tax on business.”

The IFS also criticised the policy by which public sector employers with at least 250 employees will be required to employ new apprentices making up at least 2.3% of their headcount.  Such a policy would, according to the IFS, not increase the quality of public services, but would simply help the government hit its target of 3 million new apprentices.

When the new levy comes into force, employers should consider how best to make use of grants and other supported training which the government makes available to employers of apprentices.  In particular, an employer with less than 50 employees can claim up to £1,500 for taking on new apprentices.