ALM10100 - End of year adjustments

At the end of the year, an employer may find that the earnings subject to secondary Class 1 NICs which they’ve reported to HMRC are incorrect. This could be for any number of reasons, for example, bonuses not awarded or a reconciliation error. Their levy liability will therefore be different as a result. If this happens they must submit an Employer Payment Summary (EPS) with the correct year-to-date figures for the tax year in which the error occurred. This revised EPS will in effect become the Month 12 EPS for the year in question.

This means that the updated EPS will update the levy liability for the Month 12 of the year where the correction is required. Where the adjustment is made to the levy liability for any of the previous 24 months, any additional funds will be accessible as the 24-month window for accessing funds paid will still be open, see ALM18000.

Detailed guidance to help employers to fix problems with running payroll, that may impact the Apprenticeship Levy, can be found on GOV.UK.

Contract settlements

After a compliance check has been carried out, HMRC will sometimes agree a contract settlement with an employer if they believe an employer owes money.

The contract settlement is a legally binding agreement, where the employer offers to pay everything that is due as a result of the check, and HMRC agrees not to use formal powers to recover that amount. An employer can only pay through a contract settlement if both the employer and HMRC agree to it, and to the terms of the contract.

If, as part of the contract settlement, an employer has to pay any apprenticeship levy due, these funds will not be available to spend on apprenticeship training. Similarly, if HMRC has to use its formal recovery powers then these funds will not be available.