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Apprenticeship levy set at 0.5% but no decision on CITB levy

The government has revealed details of its new apprenticeship levy but has not yet made a final decision over how it will affect the CITB’s existing construction industry levy.

Acording to Construction News, chancellor George Osborne stated the apprenticeship levy will be set at a rate of 0.5 per cent of an employer’s wage bill and will take effect from April 2017.

However, in terms of how the levy would operate in industries that already have a similar system in place, such as construction, the Treasury said: “We are working with the relevant industry training boards to consult with their members ahead of the introduction of the apprenticeship levy on how their existing arrangements will be affected and whether any changes are required.”

Under the new system, levy payment will be taken via PAYE.

For example, Skanska UK’s £227.4m wage bill as stated in their 2014 annual accounts, would lead to a levy payment of £1.122m.

The levy is expected to raise £3bn a year in the UK by 2019/20.

Employers will receive an allowance of £15,000 to offset against their levy payment, meaning that it will effectively only be paid by employers with a wage bill in excess of £3m – or less than 2 per cent of UK employers.

Employers are to receive funds in a digital account that they can spend on training providers of their choosing.

CITB chairman James Wates said:“While today’s announcement regarding the Apprenticeship Levy creates a challenging environment for CITB across Great Britain, we will continue to support industry and work with government to ensure the best possible outcome.

“Our next step is to engage in extensive consultation with employers and work out the most effective way to continue providing the construction industry with the skills and training it needs.”

Consultation will continue over how long firms will have to use their levy funding before it expires, although the government made clear that “where employers choose not to use the funds in their digital accounts we will make these more widely available”.

The levy will apply to all firms in the UK. Spending on apprenticeships in England is expected to be £2.5bn, with Scotland, Wales and Northern Ireland to receive “their fair share” of the money raised, according to the Treasury.

The government also said that any employer in England that pays the levy and is “committed to apprenticeship training” will be able to “get out more than they pay into the levy”, via a top-up to their digital accounts.

The Treasury said: “Funding caps will be significantly higher for programmes which have high costs and are of high quality.”

In addition to increasing spending, the government will establish a new employer-led body called the Institute for Apprenticeships that will set apprenticeship standards and quality.

The institute will be independent from government and led by an independent chair, and supported by a small board made up primarily of employers, business leaders and their representatives.

It will advise on the level of levy funding each apprenticeship should receive.

Consultation and discussion with employers and training providers will continue, with legislation to be introduced in the Finance Bill 2016.

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