Employment intermediaries have significant concerns about the Government’s planned Apprenticeship Levy, new research from Umbrella Company trade association the Freelancer and Contractor Services Association (FCSA) has found.

Fourteen per cent of those polled think that their businesses may be in jeopardy as a direct result of the Levy’s additional expense, 38 per cent said that they have not yet worked out how to plan for funding the Levy and nine per cent said that they will have no option but to absorb the new costs as an overhead. Additionally, 40 per cent said that they would consider hiring apprentices of their own even though the Levy itself is insufficient to offset the full cost of such a move.

The scheme is scheduled to come into effect in April next year and will be obligatory for all businesses with a payroll of £3m or over.

The FCSA has contacted the Government to express concerns on behalf of its members: intermediaries should be excluded from the Levy, it says, because their payrolls are artificially high, consisting of contracting and freelancing professionals who are undertaking work for end-clients.

The Government has confirmed the following details of the Levy:

With normal monthly income tax and National Insurance Contributions, the Levy will be paid on a PAYE basis by all affected UK employers at 0.5 per cent of their pay bill. Payments will begin in April 2017.

Payment of the Levy on the initial £3m of the pay bill will be offset by a Government allowance of £15,000.

Every month thereafter, the Government will give all affected employers a “top-up” of ten per cent to the funds going into their accounts.

Employers will then be entitled to use an online Digital Apprenticeship Service account to draw down on funding should they wish to finance any externally provided training that is designated as part of an approved framework or standard.

From the moment funds enter the Digital Apprenticeship Service accounts, they will remain valid for two years.

FCSA CEO Julia Kermode said that policymakers in the Government have clearly failed to take heed of the sector’s concerns and is steaming forward with a plan that is simply neither appropriate for the intermediaries’ industry nor fit for purpose.

She added: “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.”

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