According to analysis by national accountancy group UHY Hacker Young - after a Freedom of Information request - it was found that HMRC (Her Majesty's Revenue and Customs) has made 84 separate investigations into under-payment of the apprenticeship levy in 2018/19.
The HMRC collected £6.2m through these investigations last year - an increase from £5.2m in 2017/18 - but they state that collectively businesses have underpaid £13.6m in 2017/2018.
As part of the apprenticeship levy, businesses running a payroll over £3m must pay 0.5 per cent of their total wage bill (minus £15,000 allowance) into a fund to be used for government approved training schemes. As these schemes do not always match their requirements, some businesses perceive the apprenticeship levy to be an extra employment tax. Research showed that more than £3bn of funding has not yet been taken up - data from HMRC indicated that only £480m had been used by 30th November 2018.
At the beginning of the year, a survey by the City and Guilds found that of the 745 levy-paying companies polled, 92 per cent reported they would like greater flexibility in how they spent the funds - 45 per cent said they would like to be able to allocate the funds to non-apprenticeship training courses.
UHY Hacker Young stated that a number of employers found the levy complicated - which meant that they accidentally underpaid, leaving them open to possible fines.
HMRC has the power to fix penalties for inaccuracy of up to 30 per cent of the amount owed for unintended non-payment. Deliberate avoidance of the levy can attract a fine of up to 100 per cent of the outstanding amount.
Clive Gawthorpe - Partner at UHY Hacker Young - stated that the increase in investigations suggested that HMRC had initially been focusing on larger businesses but is now also including smaller businesses.
He added:
“We have seen additional problems arise among large businesses where several different parts of the same business group may be liable to pay the levy. The high number of investigations HMRC is launching into underpayment is a symptom of the wider problems that are hampering the scheme’s effectiveness. These urgently need addressing.”
The Institute of Directors have brought to notice the new levy reforms which will come into effect next month. These will present greater flexibility in the use of funds.
In his spring statement the Chancellor, Philip Hammond, announced that the amount SME’s will be expected to contribute towards training apprentices will drop from 10 per cent to 5 per cent, which he claimed would bring businesses a saving of £695m. He also brought forward the increase in the amount of levy funding that businesses will be allowed to share with their supply chain - an increase from 10 per cent to 25 per cent.
