Paying the Apprenticeship Levy

HMRC has published guidance on paying the new Apprenticeship Levy. The new levy comes into effect from 6 April 2017 at a rate of 0.5% of the employer’s ‘pay bill’. To exclude smaller employers, a £15,000 annual allowance can be claimed. This will mean that only employers with a pay bill in excess of £3 million will contribute to the levy. The £3 million limit also applies to companies who are connected to other companies or charities for the Employment Allowance and which, in total, have an annual pay bill of more than £3 million.

Employers who aren’t connected to another company or charity will have an Apprenticeship Levy allowance of £15,000 each year. This means that the Apprenticeship Levy payable is reduced by £15,000 across the year. It will not be possible for any unused allowance to be carried over to the following tax year.

The pay bill will be based on total employee earnings subject to Class 1 secondary NICs including wages, bonuses and commissions. It also includes earnings below the Lower Earning Limit and the Secondary Threshold as well as employees under the age of 21 and apprentices under the age of 25.

Employers can choose how to split the allowance between PAYE schemes or with connected companies or charities. The allocation cannot be changed during the tax year. From 6 April 2017, employers will need to tell HMRC how much Apprenticeship Levy they owe each month using their Employer Payment Summary (EPS).

Records relating to payment of the Apprenticeship Levy must be held for at least three years after the tax year they relate to. The levy will be paid through the PAYE process in the same way as Income Tax or National Insurance contributions. Any overpaid Apprenticeship Levy made during the tax year will be refunded as a PAYE credit. Apprenticeship Levy payments are a deductible expense for Corporation Tax. The guidance also provides advice for schools on paying the levy. This advice depends on the status of the school.

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Case Studies

The Tax Man

Minimise the stress of an investigation and make use of our extensive experience in securing best outcome for our clients

Business Valuation in Distress

Take advantage of our impartial and rigorous due diligence procedures

FD in The Cupboard

Our innovative ideas are here to improve your business performance and secure appropriate and cost effective funding

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The Tax Man

The Tax Man

A new client was introduced to us via a recommendation with whom we arranged to meet on a regular basis in order to determine a number of changes that we felt were needed to their business structure. The client was at the time operating as a husband and wife partnership. The business was flourishing and had a number of large contracts with big organisations.

At the start of the process they were still heavily immersed in their day to day operations so we can get a full flavour for their ambitions, aspirations and growth plans. We quickly recognised there were sufficient tax savings which can be achieved by changing the structure from a partnership to a corporate entity. We carried out a business valuation and disposed of the goodwill from the old to the new business. Unfortunately, as often is the case with efficient tax planning, HMRC got involved and disputed our valuation.

An HMRC investigation can be a very stressful time for any client, even for those best prepared. However, our client had minimal input in the HMRC communication as we dealt with this professionally behind the scene. As an added benefit, our client could rest on the security that all work was covered by insurance and therefore all costs and time in dealing with this enquiry were covered by the fee protection policy we had put in place.

The initial approach taken by HMRC was very aggressive and they tried to present an argument that there was no goodwill in the business. We challenged HMRC’s view that the goodwill was worthless. After lengthy correspondence and numerous telephone calls, HMRC agreed 100% with our original valuation, which preserved our original tax saving plan for the client. Tax savings on this case where in the region of £75K at the outset, with ongoing savings of £6,000 per annum. We are pleased to add another happy client to our portfolio.

Business Valuation in Distress

Business Valuation in Distress

Selling a business is never an easy process, but when disputes arise, the need for a reliable third party due diligence process is even greater.

Tearle & Carver have extensive understanding of the requirements for remaining objective when managing a potentially difficult company buyout. In one such case, we were approached by the courts to act as independent accountant for an acrimonious business sale in which one partner was exiting the business and selling shares to the other. Given the circumstances, both sides had totally polar views of what their business was worth.

After arranging an initial meeting with the company, we were thorough in ensuring we completed due diligence, validating the figures in the accounting records, carrying out adjustments where appropriate, and drafting a set of reliable management figures within the framework required by the court.

A draft version of the report detailing our findings and conclusions was submitted to both parties, giving them the opportunity to voice any queries or concerns and ensure all relevant factors had been taken into account.

Through this process, we were able to submit a final report to the courts that was both binding and acceptable to both parties, effectively resolving what could otherwise have been a time consuming and costly process for all sides.

FD in The Cupboard

FD in The Cupboard

For smaller companies, it is often not possible or cost effective to pay for a full-time Financial Director.
Many of our clients therefore make use of Tearle & Carver’s extensive expertise to provide the services of an FD as and when required.

In this case, we were approached by the management team of an organisation looking to acquire the existing business via an MBO (Management buy out). Their business plan had proved ineffective for securing funding, and what they needed was financial expertise from someone with a developed understanding of the company’s internal workings.

Tearle & Carver helped deliver the solution our clients were looking through utilising our bank contacts in order to make the MBO viable, while also building a robust business plan and preparing our client for the rigorous vetting process. To help with cash flow issues, we introduced factoring which led to improved cash flow management.

We advised on the appropriate business valuation and structure, and continued to prepare monthly accounts to track profgress once the management were fully in command of all the information they needed to move their business forward.

In order to best assist these clients through the crucial first year of ownership, we attended board meetings on a regular basis, a service that we continue to provide to date.

With our continually developing understanding of their business, this client is able to remain confident that Tearle & Carver can provide any financial support they may need, now and in the future.