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IR35 reforms: How will the Apprenticeship Levy impact your recruitment agency?


IR35 reforms: How will the Apprenticeship Levy impact your recruitment agency?

Just 34 working days remain for the IR35 reforms to come into force....

Do you have a plan in place to deal with the consequences of the Apprenticeship Levy?

How will the Apprenticeship Levy impact your recruitment agency?

The Apprenticeship Levy will require all employers from both public and private sectors operating in the UK and with an annual pay bill over £3 million, to fund apprenticeships at a rate of 0.5% of their total annual pay bill.  There is an initial £15,000 allowance. 

It is estimated that the levy will affect only 2% of the business; however, as the levy is paid on the pay bill (the total value of the agency payroll), recruitment agencies will bear the brunt of the levy, which many industry leaders have termed as a payroll tax. Adding insult to the injury is the fact that the funds collected through the levy are intended to be used by the employer for training for their own employees (workers employed for a year and a day) – making it all but impossible for agencies to use it for training their temporary workers.  Mark Bull, CEO of Randstad UK and Middle East, has called the levy ‘complete and utter madness’.

While agencies can use the funds from the levy to train internal employees, they are still likely to lose money through the tax. How can you minimise the damage from the Apprenticeship Levy? Some agencies are trying to broker deals with the end employers – public sector bodies. Others, like Randstad are trying to mitigate the losses by applying to become accredited apprenticeship-training providers, and receiving payments for the training provided – but this is a hugely costly exercise and would only be of interest to the top end of the recruitment sector.  

What has exacerbated the damage this will cause is because it coincides with the IR35 reform and the addition of workers to an agency’s payroll where their contract and work is deemed to fall within IR35 and therefore they have to work on a PAYE basis.  Your payroll may currently not be over £3million but you don’t have to have that many workers to quickly take you over that amount.

Act now – fully assess your current public sector PSC workers, identify whether they will fall within IR35 and then estimate your annual payroll.  If you are looking at £3million+, then you need to make arrangements now.

Full details about how to pay the monthly levy from 6 April if your payroll exceeds £3 million can be found here: https://www.gov.uk/guidance/pay-apprenticeship-levy 

Need assistance?

Our IR35 experts would be happy to talk to you on a call or visit your office for a chat over a cup of coffee. For any queries regarding IR35, please feel free to contact:

Pom Chakravarti: Call 07870 678 557 or email pom.chakravarti@qxltd.com

Kunal Shah: Call 0758 4651087 or email kunal.shah@qxltd.com.  



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