Apprentice Levy

joeypesci

I work as an IT contract. Started a new contract and having to use an umbrella company. That's all new to me. Just noticed a charge on my payslips for the 3 weeks been in this role so far. It says "Apprentice Levy". I questioned them about it and they state:

The Apprenticeship Levy is a statutory levy HMRC have put in place. This means that we are legally obliged to make the deduction. It affects all large businesses in the UK. The Apprenticeship Levy is part of the government being committed to boosting productivity by investing in developing vocational skills. The levy is not a deduction that we make for ourselves.


We mention it to all of our contractors when we run through the pay illustration before completing the registration form. I have also attached the welcome email I sent through to you on 12th December. It has a pay illustration attached, with the apprenticeship levy printed under ‘employment costs’.

I can see it mentioned in the contract now however the only thing I can find on the .gov website is that is something the companies themselves should be paying. Suggesting they are illegally then pushing the cost onto all their contract workers.

Am I correct and is this illegal and NASA, the umbrella company, should be paying this themselves out of their own company money?

https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work/apprenticeship-levy-how-it-will-work

enjoyyourshoes

It should be for large employer with anpybills over £3M

This sounds odd unless you really are an employee and its their way of deflecting their responsibilities.


https://www.gov.uk/government/publications/apprenticeship-levy/apprenticeship-levy

LittleVoice

Are you also being charged EmployerS NI?
If so, are they saying you are a company in a group with them and their paybill for all such members with amount to £3M+

motorguy

joeypesci wrote: »

I work as an IT contract. Started a new contract and having to use an umbrella company. That's all new to me. Just noticed a charge on my payslips for the 3 weeks been in this role so far. It says "Apprentice Levy". I questioned them about it and they state:



I can see it mentioned in the contract now however the only thing I can find on the .gov website is that is something the companies themselves should be paying. Suggesting they are illegally then pushing the cost onto all their contract workers.

Am I correct and is this illegal and NASA, the umbrella company, should be paying this themselves out of their own company money?

https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work/apprenticeship-levy-how-it-will-work

This has been covered many times before on here and the answer is - they are right in what they are doing. Also, they will be charging you Employers NI too.

Heres why :-

1. You're being charged out to the client for £X a day. The client pays that for your services, end of.
2. You, however have either opted to be OR more likely the contract has been deemed inside IR35 and as such are working effectively as an "agency worker" and you are taking a PAYE wage into your current account.

As part of that they have to pay your overheads - EmployersNI, Apprenticeship levy and you then pay EmployeesNI and PAYE Tax out of that.

The issue is ultimately at one end you're charging a day rate for services and at the other end you're taking a PAYE wage. Thus out of your day rate you're paying the employers contributions too.

Now, people on here who dont understand it will postulate and huff and puff and tell you i'm wrong because they dont understand whats happening, however thats how it is - it is NOT a normal Employer / Employee relationship - at one end you're charging a day rate for a service, at the other end you're taking a PAYE wage.

I suspect your contract has been deemed inside IR35 (public sector at a guess?) OR you've opted to go through an umbrella company and take a PAYE salary.

motorguy

enjoyyourshoes wrote: »

It should be for large employer with anpybills over £3M

This sounds odd unless you really are an employee and its their way of deflecting their responsibilities.


https://www.gov.uk/government/publications/apprenticeship-levy/apprenticeship-levy

Its not a way of deflecting their responsibilities, its how the taxation system works if you're charging a client a day rate at one end, pushing that through an agency / umbrella company and taking a PAYE salary at the other end.

The Employers NI and the Apprenticeship levy then comes out of the day rate.

motorguy

joeypesci wrote: »

I work as an IT contract. Started a new contract and having to use an umbrella company. That's all new to me.

Yes, its because you're going through an umbrella and not your limited company. Any PAYE costs then come out of your day rate.

You have said you are "having to use" an umbrella company - I take it its inside IR35?

PasturesNew

Using an umbrella company is an easy way for contractors to be able to go to work and "forget" all the Ltd company stuff. Go to work, get the timesheet signed, client is billed, you get a payslip.

The umbrella provides you with a service - to receive payment and produce a payslip and all the right figures.

You are not an employee of the umbrella company. You are choosing/using them for the services they provide to contractors who do not wish to set up their own Ltd company/do accounts/do all the billing etc. The umbrella are not choosing you - you can't go to work tomorrow and be sent home/sacked only to find the umbrella company has sent another person to do that job.

You got the contract with the client. You chose the umbrella company to provide you/your self-employment company with payroll services and relevant paperwork.

unforeseen

motorguy wrote: »

Yes, its because you're going through an umbrella and not your limited company. Any PAYE costs then come out of your day rate.

You have said you are "having to use" an umbrella company - I take it its inside IR35?

Why? I had an inside IR35 contract and carried on going through my ltd co

motorguy

unforeseen wrote: »

Why? I had an inside IR35 contract and carried on going through my ltd co

True.

I take it its inside IR35 and public sector - you're then forced to be taxe via PAYE.

unforeseen

motorguy wrote: »

True.

I take it its inside IR35 and public sector - you're then forced to be taxe via PAYE.

Yes. It gave my accountant something to do to sort out the final tax/NI situation.

I won't be touching public sector IR35 roles again

motorguy

unforeseen wrote: »

Yes. It gave my accountant something to do to sort out the final tax/NI situation.

I won't be touching public sector IR35 roles again

Yes, you need a massive uplift in day rare to make it viable.

You lose almost 50% of your day rate inside IR35. :eek: