Blog: Give it some welly or give it away. But don’t give it back!

Many companies spend a great deal of time and money to avoid paying more tax than they need to. Why, then, are so many companies giving up on the Apprenticeship Levy and taking it on the chin as a tax when they don’t need to?

The BBC reported last week that “At least 55 of the largest employers in England have each released more than £1m back to the government which was meant to be spent on apprentices.” 

What a waste! And what a missed opportunity. The apprenticeship system is more complex than it needs to be, but there’s lots of scope for companies to spend their Levy wisely to promote the success of their business. And if they really can’t find apprenticeships which suit the needs of their business, there’s a mechanism for them to pass their Levy funds on to others, so they can instead. The last thing companies should be doing is handing their money over to the Treasury. 

When George Osborne created the Levy he said that it was a very special kind of tax because companies could get their money back. He meant, of course, “… so long as they stick to the rules”, and there have been plenty grumbles about those rules, not least from the CBI. That’s why I use the phrase “give it some welly”; I acknowledge that the process isn’t as easy as it ought to be, and it needs a bit of effort.

But if it was my company, I’d put in some effort to save £1m. 

The issue arises because the payments which companies make if they’re eligible to pay the Levy expire after 24 months; if companies don’t spend those funds on statutory apprenticeships within that time, the money goes to the Treasury. Use it or lose it. 

The range of apprenticeships available may well be much wider than most companies realise. In a port, for example, it’s not just about entry grade port operatives. Ports can – and do – also use apprenticeships for supervisors, specialist managers, and marine pilots; a harbour master apprenticeship has just been approved, and PD Ports has designed a higher level management degree apprenticeship with Teesside University, tailored to their own needs.

Ports are also using all the generic apprenticeships relevant to any company: engineering, finance, HR, marketing, and so on. Look at the list on the Institute for Apprenticeships website, and there’s a very wide range. Cyber security technologist, anyone?

A key thought to bear in mind is that apprenticeships are no longer just about entry level jobs for school leavers. Think of them instead as a substantial Government subsidy for employees learning new skills, regardless of age, including people learning new skills mid-career. 

Maybe there’s a gap in the current list, an apprenticeship your company wants which is not yet available? It could be made available though, if there’s sufficient interest. Talk to your trade association (or me, if you’re stuck).

And what do you do if you’ve pushed your options as far as you can and you still can’t find a way to use all your Levy on your own team? You have a choice: you can let the Treasury have your money, or you can pass it to someone else so they employ apprentices instead.

This option arose because major manufacturing companies, particularly in the automotive sector, wanted to be able to help firms in their supply chain. There are some rules – there are always rules – but the core idea is that unspent Levy money goes to another employer of your choice, perhaps to support your Corporate Social Responsibility aims.

Liverpool John Moores University did just that, passing across £132,000 of unspent Levy to a local charity, which has used it to employ 44 apprentice care workers.

There’s no point denying that there’s more complexity in the system than there ought to be, and I’m keen to challenge those obstacles, but companies have more scope to turn the Levy to their advantage than many realise.

I’d be very interested to hear from any company which has tried to spend all its Levy and got stuck. In the meantime … give it some welly!

Iain Mackinnon is Secretary to the Maritime UK People and Skills Forum