Newsline from Build UK

Understanding the CITB and Apprenticeship Levy

01 July 2016

Understanding the CITB and Apprenticeship Levy

Over the next two years Build UK will be working closely with CITB to deliver the following:

1.    Agree and implement a Transition Package that ensures construction employers are not bearing the cost of both the CITB Levy and the new Apprenticeship Levy
2.    Agree and implement a new CITB Levy Order
3.    Agree and implement a new Grants Scheme.

The Government’s new Apprenticeship levy takes effect from April 2017 and will be paid by all employers with a payroll of £3 million. This means that some construction employers will be paying both the CITB Levy and the Apprenticeship Levy.

Build UK has clearly stated that employers should not bear the full cost of the two levies, however, until the next consensus process which will take place in the autumn of 2017, employers in scope to both the CITB and the Apprenticeship Levy will be required to pay both.

To address this issue, CITB has proposed that from April 2017 to March 2018 there will be a transitional arrangement enabling employers to reclaim CITB grants for training up to the value of any Apprenticeship Levy paid, details of which are expected shortly.

In April 2018 any transitional arrangements will end and, if supported by industry, a new CITB Levy Order that takes account of the Apprenticeship Levy will be introduced.

Build UK is represented on the CITB Levy Working Group tasked with developing the new levy proposals. To help members understand what will be happening and when, we have prepared a colour coded timeline of CITB activity.

Whilst both the CITB Levy and the Apprenticeship Levy require employers to pay 0.5% of their PAYE bill, the various thresholds that apply mean that this does not simply sum-up to firms paying a total of 1% on PAYE.

Impact of CITB Levy and Apprenticeship Levy on Employers 2017-18
 

Scheme Rules
Apprenticeship Levy

Levy rate
0.5% of employer’s annual pay bill, paid to HMRC through PAYE system.

Thresholds/allowances
Allowance of £15,000 per year to offset against levy bill. Therefore, only have to pay levy if pay bill exceeds £3 million.

Further information
See here

CITB Levy

Levy rate
0.5% PAYE + 1.25% on Net CIS payments


Thresholds/allowances
Wage Bill:
- £79,999 or less: No CITB levy paid.
- £80,000 - £399,999: 50% reduction on CITB levy bill.
- Over £400,000: Pay full CITB levy.


Further information
See here

N.B: Total wage bill includes PAYE plus payments to net (taxable) CIS subcontractors for a year.

For simplicity, calculations below assume employers makes no Net CIS payments.

Employer with annual wage bill of £79,999 or less

CITB Levy or Apprenticeship Levy Payments?
Employer does not need to make any CITB Levy or Apprenticeship Levy payments.

Total payments (CITB Levy + Apprenticeship Levy)
No payments need to be made.

Employer with annual wage bill between £80,000 - £399,999

CITB Levy or Apprenticeship Levy Payments?
Employer needs to make CITB Levy payments but no Apprenticeship Levy payments.

Example of employer with annual pay bill of £200,000 (No Net CIS payments)

CITB Levy Payments

0.5% x £200,000 = £1,000

Employer eligible for 50% reduction on CITB levy bill.

Total CITB Levy payments = £500

Apprenticeship Levy Payments

0.5% x £200,000 = £1,000

Apprenticeship Levy payment would be £1,000 - £15,000 allowance = £0

Total payments (CITB Levy + Apprenticeship Levy)
£500
 
Employer with annual wage bill between £400,000 - £3,000,000

CITB Levy or Apprenticeship Levy Payments?
Employer needs to make CITB Levy payments but no Apprenticeship Levy payments.

Example of employer with annual pay bill of £1,500,000 (No Net CIS payments)

CITB Levy Payments

0.5% x £1,500,000 = £7,500

Employer not eligible for reduction on CITB levy bill.

Total CITB Levy payments = £7,500

Apprenticeship Levy Payments

0.5% x £1,500,000 = £7,500

Apprenticeship Levy would be £7,500 - £15,000 allowance = £0

Total payments (CITB Levy + Apprenticeship Levy)£7,500
 
Employer with annual wage bill above £3,000,000

CITB Levy or Apprenticeship Levy Payments?
Employer needs to make both CITB Levy payments and Apprenticeship Levy payments.

Example of employer with annual pay bill of £5,000,000 (No Net CIS payments)

CITB Levy Payments

0.5% x £5,000,000 = £25,000

Employer not eligible for reduction on CITB levy bill.

Total CITB Levy payments = £25,000

Apprenticeship Levy Payments

0.5% x £5,000,000 = £25,000

Apprenticeship Levy would be £25,000 - £15,000 allowance = £10,000

Total payments (CITB Levy + Apprenticeship Levy)£35,000