Connected companies with a combined pay bill of over £3 million will have to pay the apprenticeship levy.

The government’s definition of a ‘connected company’ is set out in the Employment Allowance guidance .

If a company has control of another company or both companies are under the control of the same person or persons, they are defined as a ‘connected company’.

A person or a company is deemed to have control if it has direct or indirect control over the company's affairs, or is entitled to acquire the majority of the voting rights or shares.

The pay bill of the connected companies will be added together to determine whether they are eligible to pay the apprenticeship levy.

If this total pay bill exceeds £3 million, the companies will pay the levy but will only be able to claim one total £15,000 levy allowance. However, the £15,000 levy allowance can be split between connected companies.

Connected companies are able to decide what proportion of the £15,000 levy allowance each company in the group is entitled to at the beginning of the tax year.

Connected companies are able to register their PAYE schemes together and attach them to a single digital account to collect their funds together to pay for apprenticeship training.

For example:

Company A, B and C in Cumbria are all connected.

Company A has a paybill of £6m, Company B has a paybill of £2m and Company C has a paybill of £1m.

At the beginning of the tax year, it is decided that Company A will take all of the £15,000 levy allowance and Company B and C will not take any of the allowance.

The levy liability of each of the companies are as follows:

Company A: 0.5% of £6m, less the £15,000 levy allowance = £15,000 levy liability

Company B: 0.5% of £2m = £10,000 levy liability

Company C: 0.5% of £1m = £5,000 levy liability

However, the companies could have split the allowance between them.