Charities will not be exempt from apprenticeship levy, minister tells Charity Finance Group

CFG: met minister
CFG: met minister

Charities will not be exempted from the government’s apprenticeship levy scheme and unspent levy money raised from the voluntary sector could be used by private business, the Charity Finance Group has discovered.

The CFG, which held a meeting earlier this month with Nick Boles, the skills minister, said the minister had confirmed that no special considerations would be granted to charities despite concerns in the voluntary sector about the cost and implementation of the scheme.

Starting on 1 April 2017, the apprenticeship levy will force all employers with payrolls of £3m and over to pay a levy of 0.5 per cent of their overall payroll amount to the government. Each employer will receive £15,000 to offset the cost of implementing this.

The difference between what they pay out and receive from the government will be put into a digital account and made available for employers to provide apprenticeship schemes.

In a written summary of the meeting, the CFG says Boles told it that unspent funds in digital accounts would be "redirected and no additional ‘ring fencing’ will be considered". This means levy money raised from charities could be used in the private sector.

But the summary also says Boles confirmed that any organisation that could not spend the money in its digital account would be able pass it to another organisation it worked with or was in its supply chain.

Apprenticeships will not be limited to young people, but the levy will be restricted to training apprenticeships, excluding additional costs such as recruitment and salaries, the summary says.

Charities that are eligible for the levy will have more than a year to use the money in their digital accounts, but the summary says it is still unclear "what the mechanism would be or the amount of time such funds could be rolled over".

Further details on how the apprenticeship levy will work are expected in the next few weeks.

The CFG says it would like to see a charity representative on the board of the new Institute of Apprenticeships and for charities to be allowed to use the levy to recover development and training costs. It is also calling on the government to ring-fence unspent levy funds for use in the third sector and to minimise charities’ "exposure to irrevocable VAT".

Anjelica Finnegan, senior policy and public affairs officer at the CFG, said in a statement: "The meeting was very productive in clarifying the government’s position in relation to how the levy can work for charities, and we have identified areas in which the Department for Business Innovation and Skills and the CFG can work together to help ensure that the levy genuinely works to build skills in the sector.

"However, we still have significant concerns that without introducing greater flexibility for charities – for example, allowing them to use the levy to cover the core costs of employing apprentices and not just on training – there is the very real risk that charities will not be able to spend their levy. This will result in their funds being redirected to other employers, potentially in the private sector. 

"If it is found that charitable resources are being redirected to subsidise training in private companies, this could not only undermine public confidence in the policy, but could also lead to a fall in donations as donors question how much of their money is going to their chosen cause."

A spokeswoman for the Department for Business, Innovation and Skills said: "We need to make sure the levy is right for all employers. This is why we are engaging with as many employers as possible to understand how the levy will work for their organisation and giving them the opportunity to work with us on the implementation design."

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