The Apprenticeship Levy was put in place in April 2017, requiring businesses to pay into a digital fund which would then be supplemented by a further 10% by the government.
The compulsory tax applies only to larger companies with a payroll of £3 million or more, while SMEs were asked to pay 10% of the cost of apprentice training, which has since been reduced to 5%.
But figures released by the Open University 12 months after the levy was introduced showed that the number of new apprenticeship starts had fallen dramatically and only a fraction of levy paid by large employers had been spent.
In response, the government introduced new rules allowing levy-paying employers to transfer up to 10% - later increased to 25% - of their apprenticeship funds to companies in their supply chain or work with regional partners or industry bodies to set up levy transfer schemes.
The problem, as Ruth Gosney, head of HR at Leeds manufacturing company Actionplas, points out, is that there is still currently no system in place to administer the transfer of funds: “Smaller companies and SMEs who do not pay the levy tax are now looking at all of this unspent money and wondering why there isn’t a system in place for redistribution?”
She is calling on employers to work together to retain as much levy funding as possible in the city and the wider region. “As we’re all aware, after 24 months, all unspent funds will be reclaimed by the government.”
In Leeds, some organisations, including Leeds City Council, have already taken action to transfer unspent levy to training providers working with SMEs in the city. It is also actively encouraging the city’s other large employers, including ‘anchor institutions’ such as the universities and colleges, to do the same.
“The problem is that there isn’t a centralised system in place to manage the levy transfer,” said Sue Wynne, Leeds City Council’s chief officer for employment and skills.
“While individual businesses can transfer funding to companies in their supply chain, administering it is yet another administrative burden and most employers will be put off even trying.
“We’re therefore encourage employers to collaborate and work with training providers on a sector or industry basis.”
For further information on levy transfers and how they work is available online at: www.gov.uk/guidance/transferring-apprenticeship-service-funds