| Taxation in the United Kingdom |
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The Apprenticeship Levy is a UK tax on employers which is used to fund apprenticeship training.
Introduced at the start of the 2017/18 tax year, it is payable by all employers with an annual pay bill of more than £3 million, at a rate of 0.5% of their total pay bill. It is collected through the Pay as you Earn process alongside other employment taxes.
The Apprenticeship Levy was announced by Chancellor of the Exchequer George Osborne in the July 2015 budget which was held following that year's General Election. [1] It was subsequently incorporated into law by Part 6 of the Finance Act 2016. [2] and came into effect at the start of the 2017/18 UK tax year on 6 April 2017. It was projected to raise £2.675 billion in its first year of operation. [3]
The Apprenticeship Levy is paid by employers with annual pay bills in excess of £3 million. In this context, the pay bill is defined as the earnings liable to class 1 secondary National Insurance contributions. The levy is payable at 0.5% of the total pay bill (i.e. not just the element over £3 million) minus an annual "levy allowance" of £15,000, [4] although the total amount payable equates to exactly 0.5% of the element over £3 million.
The levy due by an employer is paid to HMRC through the Pay-as-you-earn (PAYE) process alongside payment of Income Tax, National Insurance contributions and money deducted from employees' wages in order to repay Student Loans. [5]
There are separate arrangements for the use of the money collected through the levy in each of England, Scotland, Wales and Northern Ireland, since apprenticeships are a devolved policy. [6]
In England, the use of the levy for funding apprenticeships is the responsibility of the Department for Education, delivered through the Education and Skills Funding Agency.
The Levy paid by each employer is held in a 'digital fund' which the employer can use to pay for apprenticeship training. A 10% government contribution is added to each monthly payment. Funds in the digital fund remain available for 24 months from the date of payment. Any amount that remains unspent after that period will expire and will be reclaimed by HMRC, including the 10% contribution.
Payment from the digital fund is made directly to training providers on a monthly basis, for as long as the apprentice remains on the scheme (i.e., until the apprenticeship is completed or the apprentice leaves). Any apprenticeship that is terminated less than 42 days after the start of the apprenticeship will not qualify for any payment. [7]
Initially, Levy-paying firms could only share 10% of their levy with other businesses. When this provision was introduced, a firm could also only nominate one other company to receive its levy fund, but from July 2018 this was extended to as many firms as the levy-payer wished. [8] On 1 October, Philip Hammond MP, Chancellor of the Exchequer, announced that from April 2019 [9] firms would be able to share up to 25% of their levy with other businesses in their supply chain, [10] a move which was welcomed by businesses. [11]
An individual savings account is a class of retail investment arrangement available to residents of the United Kingdom. First introduced in 1999, the accounts have favourable tax status. Payments into the account are made from after-tax income, then the account is exempt from income tax and capital gains tax on the investment returns, and no tax is payable on money withdrawn from the scheme. Cash and a broad range of investments can be held within the arrangement, and there is no restriction on when or how much money can be withdrawn. Since 2017, there have been four types of account: cash ISA, stocks & shares ISA, innovative finance ISA (IFISA) and lifetime ISA (LISA). Each taxpayer has an annual investment limit which can be split among the four types as desired. Additionally, children under 18 may hold a junior ISA, with a different annual limit.
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IR35 refers to United Kingdom's anti-avoidance tax legislation designed to tax 'disguised' employment at a rate similar to employment. In this context, "disguised employees" means workers who receive payments from a client via an intermediary, for example, their own limited company, and whose relationship with their client is such that had they been paid directly they would be employees of the client.
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A Qualifying Recognised Overseas Pension Scheme, or QROPS is an overseas pension scheme that meets certain requirements set by Her Majesty's Revenue and Customs (HMRC). A QROPS and it can receive transfers of British pension benefits. The QROPS programme was part of British legislation launched on 6 April 2006 as a direct result of EU human rights requirements of the freedom of capital movement.
Taxation may involve payments to a minimum of two different levels of government: central government through SARS or to local government. Prior to 2001 the South African tax system was "source-based", where in income is taxed in the country where it originates. Since January 2001, the tax system was changed to "residence-based" wherein taxpayers residing in South Africa are taxed on their income irrespective of its source. Non residents are only subject to domestic taxes.
A mansion tax is a common name for an annual property tax on high value homes, although the term itself is widely regarded as a misnomer. The tax was only a proposal in the United Kingdom, but proved very controversial and received widespread media coverage. It did not go ahead.
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George Osborne served as Chancellor of the Exchequer from 2010 to 2016 in the Cameron–Clegg coalition and Cameron majority government. His tenure pursued austerity policies aimed at reducing the budget deficit and launched the Northern Powerhouse initiative. He had previously served as Shadow Chancellor of the Exchequer from 2005 to 2010. He was succeeded by Philip Hammond.