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14% of intermediaries fear going out of business when Apprenticeship Levy is imposed

Government plans to introduce the Apprenticeship Levy have been met with mixed response by intermediaries according to research conducted by The Freelancer & Contractor Services Association (FCSA), the UK’s largest independent trade association whose members provide professional support services to some 120,000 freelancers and contractors.
14% of intermediaries believe that their businesses could be at risk as a result of having to bear the additional cost of the Levy, four in ten (38%) respondents say they have no plans about how they are planning on funding the Levy with one in ten (9%) claiming they will have to absorb it as an overhead.  40% of respondents said they would consider hiring apprentices within their own businesses, despite the levy not offsetting the full cost of doing so.
The Apprenticeship Levy will come into force in April 2017 and will affect all companies with a payroll of £3m+.  FCSA has expressed its concerns to the Government on behalf of its members requesting that intermediaries are exempted from the Levy because their payroll is artificially high, consisting of contractors and freelancers who carry out work for end-clients.  Recently the Government confirmed that:
  • The levy will be paid by UK employers at 0.5% of their paybill, through Pay As You Earn (PAYE), alongside income tax and NI on a monthly basis from April 2017.
  • All employers will be given an allowance of £15,000 to offset against payment of the levy on the first £3million of paybill.
  • Each month employers will receive a 10% ‘top-up’ from the Government to the funds entering their accounts.
  • Employers will then be able to draw down on funding to pay for externally provided training as a part of an approved standard or framework through an online account on the new Digital Apprenticeship Service
  • All funds will be valid for 24 months from the time they enter the Digital Apprenticeship Service accounts.

Commenting, Julia Kermode, Chief Executive of FCSA said: “Government policy makers have clearly not listened to the sector’s concerns and are pressing ahead with something that is simply not fit for purpose and not appropriate in our industry.  Intermediaries like umbrella companies and recruitment firms have artificially high payrolls and the Levy is one more cost to be borne, effectively another tax on a sector that has had more than its fair share of additional burden in recent years.  Intermediaries are clearly concerned about the impact the Apprenticeship Levy will have on their businesses with 14% of our respondents telling us that they fear going out of business because of the Levy and that is a grave concern.”