Apprenticeship Levy Transfers: Update

From 1st February 2022, if you are a large employer that transfers unused apprenticeship levy funds to another business to help them pay for their apprenticeship training and assessment, you will now also be able to receive funds from another levy-paying employer, in order to take on new apprentices.

Large employers that pay the apprenticeship levy can choose to transfer up to 25% of their levy funds each year to other businesses. Transfers can only be used to pay for training and assessment for apprenticeship standards and only for new starts.

From this month, these same employers can now receive a percentage of another employer’s unused funds, a move that might reduce the amount of unspent funds returned to HMRC each year.

Why transfer your apprenticeship levy funds?

Transferring some of your apprenticeship levy is a great way of supporting other businesses, it could be an investment in specific sectors, specific skills or in a local community.

Levy-paying employers have 24 months to spend their levy before unused funds are returned to the Government, transferring some of the projected underspend to create further investment means you retain control of more of your levy and can support your supply chain or local network.  

Transferring funds in this way could strengthen relationships, make training cohorts more viable or help develop skills and employment opportunities in a local area.

Which businesses and apprenticeships you support with a transfer is your choice.

Your transfer allowance

Your transfer allowance is calculated as 25% of your previous financial year’s apprenticeship levy funds. The apprenticeship service calculates this amount as 25% of:

  • The total amount of levy you declared in the previous tax year
  • With the English percentage applied (the percentage of your employees that live in England
  • Plus the top-up payment of 10% from the government

You cannot transfer more than your 25% allowance in each financial year.

What can levy transfers pay for?

Transferred funds can only be used to pay for apprenticeship training and assessment up to the funding band maximum. And transfers can only be used to support new apprentice starts. This doesn’t mean the apprentice has to be a new employee, but it means you cannot use transfer funding to support an employee who has already started their apprenticeship.

The exception to this is when an apprentice changes employer. The apprentice can continue their apprenticeship with a new employer, funded by a transfer of levy funds.

Your commitment when transferring levy funds

It is worth noting, that a transfer of levy funds is not a one-off payment. By agreeing to transfer levy funds to another business, you are committing to pay for a specific apprenticeship over the course of its duration until the apprenticeship has been completed.

As all apprenticeships are a minimum of 12 months may start at any point in the year, you may be agreeing to transfer funds over multiple financial years. In addition, the duration of an apprenticeship may vary from the initial estimate and could include breaks in learning, for example if the apprentice needs to go on extended leave.

Your training provider should be able to forecast your spend and ensure that neither you nor the business you are transferring funds to will run out of money mid-way through an apprentice’s training. This isn’t game over- the apprentice can continue learning – but the employer (either you or the other business) will need to contribute 10% of the training costs.

Making payments on a monthly basis

The levy funds being transferred will leave your apprenticeship service account on a monthly basis. The transfer funds will be prioritised over payments for your own apprentices so will leave your account first each month.

The Apprenticeship Levy is still relatively complex to navigate. Despite this and the ongoing commitment. levy transfers represent another opportunity to re-invest unused funds and strengthen bonds and workforces in any supply chain.

For more information on Apprenticeship Levy transfers, or how to use the Apprenticeship Levy to support your workforce development plans, get in touch.