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HMRC internal manual

Compliance Operational Guidance

HM Revenue & Customs
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Supporting Guidance: employer compliance: guidance by subject: commencing the compliance check: reduction of secondary contributions of national insurance contributions for apprentices under 25

From April 2016 relief for apprentices under 25 years old was introduced.

The rate of employer Class 1 secondary contributions will be 0% for employees over 16 and under the age of 25, up to a new earnings level, the ‘Apprentice Upper Secondary Threshold’ (AUST). Class 1 secondary National Insurance contributions (NICs) will continue to be payable on all earnings above the AUST. The basic structure of National Insurance (NI) and how Class 1 NICs are assessed will not change. All the assessment principles will remain the same as they are now and Class 1 primary contributions will not be affected.

There will be a range of NI category letters to use when assessing secondary NICs in respect of the earnings paid to these employees.

The two new category letters introduced to support this measure are detailed below:

  • G - Mariners rate contributions for apprenticeships under 25
  • H - Standard rate contributions for apprenticeships under 25

If the employer uses any of the new NI categories you must:

  • check the employee’s date of birth and

where the employee is over 25

  • do not disclose any date of birth or other personal details
  • advise the employer how to make any necessary open year adjustment, and
  • seek recovery for closed years, where appropriate.

You will need to check that the employer holds the right evidence to apply the relief. This can be either a written agreement between the employer, the apprentice and a training provider, or evidence that the apprenticeship receives government funding.

Any written agreement must show:

  • the government apprentice framework or standard
  • a start and (expected) end date for their apprenticeship scheme.

If the training provider has not signed the written agreement, they will need to give the employer a document that:

  • confirms they are an approved (recognised) training provider
  • specifies the training the apprentice is undertaking (and any training already done).

The employer could also be the trainer if they are approved by the Skills Funding Agency in England, or hold a contract for the delivery of apprenticeships in Wales.

Alternatively, in England and Wales, the employer may provide evidence of government funding of the apprenticeship. This could be the declaration to receive apprenticeship incentive payments, or the employer payment schedule to the provider.

More information can be found at Paying employer National Insurance Contributions for Apprentices under 25 guide (GOV.UK).