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HMRC internal manual

Apprenticeship Levy Manual

Relationship with Corporation Tax

Payments of the Apprenticeship Levy are deductible for the purpose of determining Corporation Tax liability.

Suggested standard accounting treatment

The suggested accounting treatment below should apply to typical transactions but the accounting required will depend on the circumstances. 

Employers who do not intend to use the levy funds

For those employers who do not intend to use the funds in their account, the levy paid should typically be recognised as an expense, as no benefit is expected to be received.

Employers who intend to use the levy

For employers who intend to use the levy, the payment represents a prepayment for training services yet to be received and should typically be shown as a prepayment asset in the accounts. As the training is received an expense would be recognised and the asset reduced accordingly.

The 10% top-up added to apprenticeship accounts by the government

For those employers who intend to use the funds in their account, the 10% top-up should typically be treated as government grant income for accounting purposes in the profit and loss account at the same point in time as the associated training or assessment expense is recognised. This is in accordance with FRS 102 section 24 and/or IAS 20.12 and IAS 20.16 (Accounting for Government grants).

90% co-investment payment added to apprenticeship accounts by the government

The 90% co-investment payment from the government should typically be treated as government grant income for accounting purposes at the same point in time as the associated training or assessment expense is recognised. This is in accordance with FRS 102 section 24 and/or IAS 20.12 and IAS 20.16 (Accounting for Government grants).