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Agency charging 12.5% - Apprenticeship Levy

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    Agency charging 12.5% - Apprenticeship Levy

    Hi

    I was a contractor and the Agency has charged me 12.5% Apprenticeship Levy. When I checked my remittance advice I can see my day rate, with deductions of PAYE, NIC and a further 12.5% (which I assume is Apprenticeship Levy).

    Initially, the agency explained to me that because the contract is within IR35 I will need to pay more tax as I am considered PAYE and as a result they offered a rate slightly higher to compensate for the higher tax.
    Later I discovered that the Apprentice Levy is not part of the PAYE so they should not have deducted this. By not objecting I guess I agreed to have the deductions only because I was led to think it was under the PAYE scheme.

    Sometime after I contacted the agency again but this time they said the charge was because of VAT, however I am not VAT registered. The total deduction for the apprenticeship levy is approx 8k.

    I mentioned this to my accountant and she thinks this is not normal.

    Should a contractor be paying Apprenticeship Levy and does the agency have the right to apply this charge ?
    Thanks

    UPDATE: This was Agencies response in the first instance ( The contract doesn't mention Apprenticeship Levy anywhere but has a day rate of £376.25, though the remittance note has a day rate of $430):

    “Firstly the pay rate of £430 per day needs to be reduced by 12.50% to cover the Er’s NIC & Apprenticeship Levy. This would take the contractors rate down to £376.25 per day.
    Assuming that HMRC return his tax code as 1150 the gross rate of £376.25 translates into an approximate net rate of £250 per day."

    When I Asked again agency spoke about charge being VAT related, neither I nor my accountant can make sense of it.

    #2
    Originally posted by OrangeJuice View Post
    Hi

    I was a contractor and the Agency has charged me 12.5% Apprenticeship Levy. When I checked my remittance advice I can see my day rate, with deductions of PAYE, NIC and a further 12.5% (which I assume is Apprenticeship Levy).

    Initially, the agency explained to me that because the contract is within IR35 I will need to pay more tax as I am considered PAYE and as a result they offered a rate slightly higher to compensate for the higher tax.
    Later I discovered that the Apprentice Levy is not part of the PAYE so they should not have deducted this. By not objecting I guess I agreed to have the deductions only because I was led to think it was under the PAYE scheme.

    Sometime after I contacted the agency again but this time they said the charge was because of VAT, however I am not VAT registered. The total deduction for the apprenticeship levy is approx 8k.

    I mentioned this to my accountant and she thinks this is not normal.

    Should a contractor be paying Apprenticeship Levy and does the agency have the right to apply this charge ?
    Thanks

    You start off by saying they charged you 12.5% Apprenticeship Levy then you said you assume it's the Apprenticeship Levy.
    Why do you think it is the apprenticeship levy?
    When you asked the agency about it, did they say it was the apprenticeship levy?

    It feels like there are parts of the story are missing or don't add up.
    …Maybe we ain’t that young anymore

    Comment


      #3
      https://www.contractoruk.com/success...ntractors.html

      https://forums.contractoruk.com/publ...-levy-tax.html

      https://forums.contractoruk.com/umbr...tice-levy.html

      If none of that adds up nail your agent for an answer and don't let him off the phone until he's explained it along with evidence.
      'CUK forum personality of 2011 - Winner - Yes really!!!!

      Comment


        #4
        Originally posted by OrangeJuice View Post
        Hi

        I was a contractor and the Agency has charged me 12.5% Apprenticeship Levy. When I checked my remittance advice I can see my day rate, with deductions of PAYE, NIC and a further 12.5% (which I assume is Apprenticeship Levy).

        Initially, the agency explained to me that because the contract is within IR35 I will need to pay more tax as I am considered PAYE and as a result they offered a rate slightly higher to compensate for the higher tax.
        Later I discovered that the Apprentice Levy is not part of the PAYE so they should not have deducted this. By not objecting I guess I agreed to have the deductions only because I was led to think it was under the PAYE scheme.

        Sometime after I contacted the agency again but this time they said the charge was because of VAT, however I am not VAT registered. The total deduction for the apprenticeship levy is approx 8k.

        I mentioned this to my accountant and she thinks this is not normal.

        Should a contractor be paying Apprenticeship Levy and does the agency have the right to apply this charge ?
        Thanks
        Did the NIC cover both Employers' and Employees' NIC?

        Comment


          #5
          Please see updated question.

          Comment


            #6
            Originally posted by Old Greg View Post
            Did the NIC cover both Employers' and Employees' NIC?
            I don't know.

            Comment


              #7
              Originally posted by WTFH View Post
              You start off by saying they charged you 12.5% Apprenticeship Levy then you said you assume it's the Apprenticeship Levy.
              Why do you think it is the apprenticeship levy?
              When you asked the agency about it, did they say it was the apprenticeship levy?

              It feels like there are parts of the story are missing or don't add up.
              I've updated the question with more info.

              Comment


                #8
                You really haven't laid out your information very well in the OP, either because you don't understand it, don't have it or a mixture of both.

                What seems most likely from the amount is that the 12.5% is some combination of Employer's NICs (13.8% for the first X amount, then 1% so a lower average percentage overall depending on your rate/pay) and Apprenticeship Levy of 0.5%

                But get a full breakdown from the agent, which should demonstrate this. That said, since you know your headline rate and all the information about how Employer's and Employee's NICs plus the Apprenticeship Levy is out there easily on the internet, you should be able to replicate the calculation yourself (I could probably do it if I had the time, from the info in your post).

                Best online calculator is listentotaxman.com to help

                Comment


                  #9
                  Originally posted by Glencky View Post

                  But get a full breakdown from the agent, which should demonstrate this.
                  Truth be told, I dont understand what the agency is telling me. Apologies if this is all bitty.
                  I've copied below a response from the agency :

                  The 12.5% deduction is the difference between the rate agreed in your contract and the higher rate on which we should be paying VAT (if applicable, i.e. your company is VAT registered).

                  The PAYE tax and NIC are the tax deductions we are required to make prior to making payment due to the new legislation for public sector contractors viewed as inside IR35.

                  The PAYE tax and NIC deductions are calculated on the pay rate agreed in your contract, and are based on tax information provided by yourself and HMRC.


                  I'm unsure what to ask the agency to make this clearer, but will ask specifically about the breakdown of the 12.5% (which is in addion to the NIC and PAYE tax)

                  Comment


                    #10
                    Originally posted by OrangeJuice View Post
                    “Firstly the pay rate of £430 per day needs to be reduced by 12.50% to cover the Er’s NIC & Apprenticeship Levy. This would take the contractors rate down to £376.25 per day.
                    Assuming that HMRC return his tax code as 1150 the gross rate of £376.25 translates into an approximate net rate of £250 per day."

                    When I Asked again agency spoke about charge being VAT related, neither I nor my accountant can make sense of it.

                    Originally posted by Old Greg View Post
                    Did the NIC cover both Employers' and Employees' NIC?
                    Originally posted by OrangeJuice View Post
                    I don't know.
                    Er's NIC = Employers NIC

                    So, 12.5% is NOT Apprenticeship Levy. in fact, doing the calculations, you're not paying any Apprenticeship Levy at all.
                    £430 a day gross would be £94,600 on a 220 day year.
                    Employer NICs on that would be £11,892.29.
                    Divide that down and you get £54.06 per day in Employer NICs.
                    Take that off your £430 and you end up with £375.94
                    …Maybe we ain’t that young anymore

                    Comment

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