From April 2017, a new employment tax arises called the Apprenticeship Levy. This levy is set at 0.5% of an organisation’s payroll bill where this is over £3m per annum and it is expected to raise over £2.7bn in the first year. Despite lobbying by the Charity sector in the lead up to the introduction of this levy, particularly with reference to the use of charitable resources, HMRC has confirmed that charitable entities will not be exempt from this levy. Therefore, as major employers, a significant number of charities will suffer this additional tax. Initial estimates suggest that around 1,200 charities will be affected, with a collective cost of £70m.
The objective of the levy is to encourage organisations to train more apprentices. It will be possible to drawdown from the amount paid by the organisation to fund this apprenticeship training. The levy could therefore be seen as a great opportunity for charities to ensure that they have the skills needed to drive the future for the sector. However, there are concerns that, due to the unique structure of the Not for Profit sector, it may be difficult for charities to recoup this money. Unlike private businesses, the vast majority of charity funds are typically allocated to their cause, making it difficult for charities to find room in their budgets to invest in development and recruitment. Therefore, it is important for charities who expect to suffer this levy to have a clear plan to utilise it effectively, to ensure this is not an additional burden but has a positive impact on the organisation.
If you would like to learn more speak with your usual Kreston Reeves adviser here, or contact Sarah Ediss on +44 (0)330 124 1399.
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