Purpose, scope and background (part 1)
Published 7 November 2024
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This publication is available at https://www.gov.uk/government/publications/help-with-the-apprenticeship-levy-and-employment-allowance-connected-entities-gfc10/purpose-scope-and-background-part-1
Purpose and scope
These guidelines on ‘Help with Apprenticeship Levy and Employment Allowance —connected entities’ are for all employers including:
- companies
- public bodies and their related entities
- charities
They aim to help employers reduce the common errors HMRC sees. Following these guidelines will help employers report their Apprenticeship Levy liability and Employment Allowance claims correctly first time.
They do not replace HMRC’s guidance in the Apprenticeship Levy manual or the National Insurance manual. The guidelines are designed to complement it and should be read alongside the guidance.
These guidelines provide help with the term ‘connected’ for the Apprenticeship Levy and Employment Allowance. They are not relevant for any other area of taxation legislation (for example Corporation Tax and VAT).
Description of terms
Throughout these guidelines we use the term ‘entities’. This includes companies, charities, public bodies and their related organisations.
Where we use the term ‘person’, it refers to an individual or entity as defined in the ‘description of terms’ section.
Background
These guidelines focus on the connected entities rules for the Apprenticeship Levy and Employment Allowance. They do not provide a detailed analysis of the Apprenticeship Levy or Employment Allowance.
Apprenticeship Levy
The Apprenticeship Levy is payable monthly by employers. The amount payable is 0.5% of the annual pay bill. A pay bill includes all earnings which are liable to Class 1 secondary National Insurance contributions.
Employers can offset a £15,000 Apprenticeship Levy allowance against their Apprenticeship Levy liability each year. Connected entities only have one £15,000 allowance to share between them. Therefore, only employers (including their connected entities) with a pay bill of more than £3 million will have to pay the Apprenticeship Levy.
Employers must pay the Apprenticeship Levy even if they do not have any apprentices.
More detailed guidance on the Apprenticeship Levy can be found in Pay Apprenticeship Levy and HMRC’s Apprenticeship Levy manual.
Employment Allowance
Employment Allowance allows eligible employers to reduce their Class 1 secondary National Insurance contributions liability by up to £5,000 in the tax year 2024 to 2025. This will increase to £10,500 from the tax year 2025 to 2026.
Public bodies (unless they are also a charity) cannot claim the Employment Allowance.
If you are connected to another entity, then only one (entity) can claim the Employment Allowance.
Currently employers can only claim Employment Allowance if their Class 1 secondary National Insurance contributions liabilities were less than £100,000 in the previous tax year. You must include all connected entities when calculating the liability. If the liability is £100,000 or more, none of the entities can claim the Employment Allowance.
From the tax year 2025 to 2026 the £100,000 eligibility threshold will be removed.
More detailed guidance on the Employment Allowance can be found at Employment Allowance and HMRC’s National Insurance manual.
Multiple PAYE schemes
Employers with more than one PAYE scheme can share the Apprenticeship Levy allowance across the schemes in a way that suits them best. They must notify HMRC of the split with their first return of Apprenticeship Levy. This will usually be at the beginning of the tax year. You can find more information at Apprenticeship Levy Allowance: shared across PAYE schemes.
These employers can only apply any available Employment Allowance against one PAYE scheme. The employer must decide which PAYE scheme will claim the allowance. More information is provided at Employment Allowance: Employers with multiple PAYE schemes.