HMRC nets £1m more by doubling Apprenticeship Levy investigations

Confusion over the Apprenticeship Levy is facilitating a growing number of investigations by the taxman, who is widening his enforcement focus to smaller businesses, accountants warn.

The complex nature of the levy, a lack of clear detail on paying it and inadequate guidance are all contributing to making AL compliance more difficult, fears UHY Hacker Young.

The non-uniform nature of outfits caught by it does not help either, and is also likely behind the taxman’s haul from probing them about it surging by £1million, the firm found.

In fact, by more than doubling its Apprenticeship Levy investigations from 33 outfits in 2017/18 to 84 last year, HMRC’s yield shot up from an extra £5.2milllion to £6.2million.

“HMRC focused on larger businesses initially as the value of potential underpayment was higher and is now widening its net to smaller businesses”, says UHY partner Clive Gawthorpe.

“The high number of investigations HMRC is launching into underpayment is a symptom of the wider problems that are hampering the scheme’s effectiveness. These urgently need addressing.”

Under the levy, all outfits with annual payroll exceeding £3m are required to pay 0.5% of their total wage bill, minus a £15,000 allowance, into a pool which they can then draw on to fund approved training schemes.

But new figures show that more than £3bn paid through the Apprenticeship Levy has yet to be drawn by businesses to fund training programmes, as only £480m had been used by November 30th 2018.

“The amount that HMRC suspects businesses to have underpaid through the Apprenticeship Levy was £13.6m in 2017/18,” UHY Hacker Young said.

“This suggests HMRC sees the Apprenticeship Levy as a potential risk area for underpaid tax and may further increase its compliance resources in this area.”

An issue for larger outfits was said to have occurred where several different parts of the same operation may be liable to pay the levy, compounded by “little guidance” to help them calculate their liabilities, said Gawthorpe, adding: “The fiendishly complex Apprenticeship Levy is clearly causing problems for businesses.”