HMRC doubles number of investigations into apprenticeship levy underpayments

The number of investigations by tax authorities into underpayment of the apprenticeship levy has more than doubled in a year.

HMRC launched 84 investigations last year collecting an additional £6.2m, according to research by accountancy group UHY Hacker Young. 

Read more: Apprenticeship levels up on last year but still hampered by 2017 levy 

There is concern that the levy’s complexity makes it difficult for companies to comply with the requirements, potentially exposing them to significant fines.

“The fiendishly complex apprenticeship levy is clearly causing problems for businesses,” said Clive Gawthorpe, partner at UHY Hacker Young.

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

The rise in the number of investigations suggests that HMRC is now widening its net after initially focusing on larger businesses where the value of underpayments was likely to have been higher, said Gawthorpe.

The apprenticeship levy regime requires businesses with wage bills in excess of £3m a year to pay 0.5 per cent of their wage bill into a fund to be used for approved training schemes. However, not all companies recover the full amount they pay into the the fund. 

Read more: Fresh data reveals the folly of Britain’s apprentice levy

The scheme is part of the government’s strategy to boost productivity and aims to develop vocational skills by increasing the quality and quantity of apprenticeships offered by employers.

The British Chambers of Commerce previously called for reform of the system, flagging the low uptake of the scheme. The Institute of Directors has also voiced concerns that the initiative is not delivering for employers or apprentices.