Many of the Employers we work with have been asking us about the rules for groups of companies, and how the Apprenticeship Levy will be applied. Key questions include:

  • How is the £15,000 allowance applied to each company or group?
  • What happens with Joint Ventures?

The detail on how group companies are treated can be found in the latest draft of the Finance Act, but I have summarised the key points here, as I am sure most of you have other priorities in the run up to Christmas than reading draft legislation!

The main section for groups of companies is Clause 99 (5) – this is the clause that sets out the £15,000 allowance allocated to companies against the apprenticeship levy. The purpose of the allowance is to ensure that companies with a pay bill under £3m will not pay the levy. However, the £15,000 is not simply applied to every company – there are some additional complexities for connected companies or groups.

Connected companies

If your organisation consists of two or more companies, they are classed as a “company unit”. The companies have to be connected at the start of the tax year, and registered charities are not included in this classification.

Each company unit (or group) receives one £15,000 allowance per tax year. The company unit can split the allowance across its connected companies as it sees fit.

So what is a connected company?

The rules for determining which companies are considered ‘connected’ will be the same as those for the Employment Allowance. The basic rule for determining that two companies are ‘connected’ with each other is:

  • One of them has control of the other
  • Both companies are under the control of the same person.

Example – connected by ownership

Company A owns more than 50% of the shares of company B. These companies would be connected as company A effectively has control of company B. Companies A and B will receive a single £15,000 allowance. This applies to any company ownership structure, including joint ventures, where a single organisation owns more than a 50% share of another organisation.

Example – Connected by a person

Company A and Company B are not linked by company structure but a majority shareholding is owned by Mr Smith. These companies would be considered as connected and will only receive one £15,000 allowance.

Acquiring a controlling share after the start of the tax year

If a company is acquired after 6 April 2017 that company is not treated as connected until the start of the next tax year. This means that, in the interim, the newly acquired company will also be able to claim the £15,000 allowance.


If between 7 April 2017 and 5 April 2018 Group X acquires or creates a new subsidiary company, the new company will not be treated as having any connected companies for the remainder of the tax year and will be entitled to its own £15,000 allowance. At 6 April 2018, the new company will be deemed as connected under the control rules above and will lose the entitlement to its own £15,000 allowance.

If you have complicated group structures the issue of control may be very complicated. We have a team of commercial analysts ready to help you understand the apprenticeship levy rules. We can also help you to understand your workforce and create a bespoke plan to fully utilise the levy, understand the wider benefits of apprenticeship programmes and support your business. Get in touch for a free consultation.