The Chancellor announced at the 2014 Autumn Statement that the government will abolish Employer Class 1 National Insurance for apprentices under the age of 25 by applying a zero-rate. The zero-rate will apply to earnings below the Upper Earnings Limit (currently £815 per week).
The measure is to be introduced by the NICs Act 2015 and will come into force as from 6 April 2016.
What follows is a consultation which will run until 18 September 2015, where interested parties have been invited to comment on the definition of a ‘relevant apprentice’ for the purposes of the zero-rate Employer Class 1 NICs.
In particular, the consultation is interested in how the defining of a ‘relevant apprentice’ will impact on the administration and compliance burden for employers.
It is expected that the savings in Employers Class 1 NIC as a result of the proposed measures is expected to significantly outweigh the costs to employers in dealing with the compliance obligations.
It is proposed that the definition of apprentices will:
a. government recognised apprenticeships in the UK i.e. those which follow government arrangements/approved frameworks. This includes frameworks or standards recognised by the Skills Funding Agency in England as well as apprenticeship frameworks approved by the Welsh, Scottish and Northern Ireland governments.
b. Exclude: apprenticeships which do not follow government approved frameworks, also known as common law, apprenticeships; and
c. Require that a ‘relevant apprentice’ is one that will have a written agreement, specifying the government recognised apprentice framework/standard, with a start and expected completion date. This will be an agreement, between the training provider, apprentice and employer and will be the evidence the employer needs to retain when applying the zero-rate of employer Class 1 NICs for an apprentice under 25.
It is intended that where an employee is considered an apprentice for National Minimum Wage purposes, they will also be considered a ‘relevant apprentice’ for the zero-rate of employer Class 1 NICs for apprentices under 25, except where the apprentice is not following a government approved apprenticeship framework or standard, e.g. common law apprenticeships.
Aim of the Regulations
The policy is intended to support employers to provide more high quality apprenticeships in the UK by removing the requirement to pay Employers Class 1 NIC on earnings up to the UEL for those employees. This should support youth employment by making it more attractive for employers to recruit young apprentices.
This policy applies to both new and existing apprentices in Great Britain and Northern Ireland.
Further details of the proposed measure can be found at the link below.
If you require any further information in relation to this matter, please ring the TaxDesk on 0845 4900 509 and ask for Martin Mann.