Apprenticeships can affect Child Benefit and Tax Credit payments.
The Government is encouraging people (particularly school leavers and those under 19) to participate in “apprenticeships”. In the recent Budget they announced a £180m package to fund an extra 50,000 Apprenticeships. In total the Government will provide funding for up to 250,000 more Apprenticeships over the next four years, and funding for 100,000 work placements over the next two years.
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However, after their first year of apprenticeship, once qualified, the employer is under no obligation to pay the young person a higher wage. Therefore, if the person wants to improve their skills more and, for example, go onto the higher level 3 qualification, if they are still under the age of 19 the employer can continue to pay the apprenticeship wage of £2.50 per hour, even though the young person is by this point 'qualified' (i.e. having just completed a level 2 NVQ, for example.)
If a young person aged 17 decided that they wanted to leave home and be independent; or perhaps even more likely, if the parent(s) could no longer afford to keep them at home (might sound dramatic, but see below), the young 17yr old is not entitled to receive any outside help (i.e. benefits) to support them whilst employed doing an apprenticeship, unless they have a child of their own, or are disabled or are classed as 'legally homeless' See here for further information about this.
Therefore, 16-18 year olds have little choice but to stay at home with their parents (if they are lucky enough to have a family home) BUT, what parents are not being told is that they will lose their entitlement to Child Benefit payments for that child, as well as Tax Credits, because the child is over 16 and ‘employed’, albeit on a low apprentice wage.
Apprenticeships and Loss Of Child Benefit (and potentially all other support) when your Child reaches 16 and finds Employment as an apprentice:
The Government is encouraging people (particularly school leavers and those under 19) to participate in “apprenticeships”. In the recent Budget they announced a £180m package to fund an extra 50,000 Apprenticeships. In total the Government will provide funding for up to 250,000 more Apprenticeships over the next four years, and funding for 100,000 work placements over the next two years.
To go hand-in-hand with their new incentive to get more people back into work (especially young people aged 16 - 18 and in particular NEETS), in October 2010 the Government introduced a new National Minimum Wage (NMW) for Apprentices.
Quite shockingly this is set at a low rate of £2.50 per hour for apprentices under 19, or 19 or over and in the first year of their apprenticeship. (Therefore you could be 35 years old and if you are in your first year of an apprenticeship your employer only has to pay you £2.50 per hour).
From hereon I will be focusing upon young people aged 16 to 17 years old, as that is primarily who the Government are targeting.
As part of their apprenticeship they will (if they have a good employer) learn new and valuable skills and, for example, they could study towards an NVQ qualification; none of which can be seen as a bad thing.
From hereon I will be focusing upon young people aged 16 to 17 years old, as that is primarily who the Government are targeting.
As part of their apprenticeship they will (if they have a good employer) learn new and valuable skills and, for example, they could study towards an NVQ qualification; none of which can be seen as a bad thing.
However, after their first year of apprenticeship, once qualified, the employer is under no obligation to pay the young person a higher wage. Therefore, if the person wants to improve their skills more and, for example, go onto the higher level 3 qualification, if they are still under the age of 19 the employer can continue to pay the apprenticeship wage of £2.50 per hour, even though the young person is by this point 'qualified' (i.e. having just completed a level 2 NVQ, for example.)
Aside from the low wage of £2.50 per hour, why do we think the new Apprenticeship scheme is unfair?
Well, to put it bluntly, parents on a low income are being royally screwed over if their child secures employment under the apprenticeship scheme - which I discuss further below.
Before doing so, please consider that on an apprenticeship wage, a 16-18 year old could not afford to live away from the family home; because they will not have a ‘support network’ around them in the form of extra financial support to enable them to survive on a ridiculously low wage of £2.50 per hour.
Well, to put it bluntly, parents on a low income are being royally screwed over if their child secures employment under the apprenticeship scheme - which I discuss further below.
Before doing so, please consider that on an apprenticeship wage, a 16-18 year old could not afford to live away from the family home; because they will not have a ‘support network’ around them in the form of extra financial support to enable them to survive on a ridiculously low wage of £2.50 per hour.
Therefore, 16-18 year olds have little choice but to stay at home with their parents (if they are lucky enough to have a family home) BUT, what parents are not being told is that they will lose their entitlement to Child Benefit payments for that child, as well as Tax Credits, because the child is over 16 and ‘employed’, albeit on a low apprentice wage.
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| There are many other Firms such as this but to view the AFA webiste go to: http://www.apprenticefunding.com/ |
From this point on parent’s are treated as having a non-dependant adult living in their household and this will affect any other benefit that the family may be in receipt of.
For example, as soon as the parent loses entitlement to Child Benefit, they will also lose any entitlement to Child Tax Credits payments for that child; Working Tax Credit will also be affected depending on the parent's income from employment, as will Housing and/or Council Tax Benefit.
This can be hugely detrimental to a working family on a low income (or a lone parent).
Even more infuriating is the fact that many teenagers and their parent's are not being told that this will happen. We are aware of cases where parent's have assumed that their child's apprenticeship course is "approved training" for Child Benefit purposes (especially those who are doing an NVQ level 2 or 3 as a day release at college). Many families have therefore continued with their claim to Child Benefit, only to find out later that their child's apprenticeship is not classed as "approved training" because the child is employed.
(See below for further information and about the old "programme-led apprenticeships" which were classed as approved training.)
Parent's could find themselves owing large sums of money due to huge overpayment's of Child Benefit payments, Tax Credits, Housing and Council Tax Benefit.
Families on low incomes facing such possibilities might consider that it is not worthwhile for their child embarking upon an apprenticeship - which would be a shame as the majority offer valuable skills.
Young people aged between 16 and 20 are still classed as "dependants" for Child Benefit and Tax Credit purposes, as long as they are in full-time non-advanced education or are doing an 'approved training' course. The Problem being that the apprenticeship scheme via an employer is not classed as approved training.
Non-advanced education includes, at school or college (not university) and includes doing subjects up to and including A levels and NVQ's up to level 3 provided they are in lessons for more than 12 hours a week in term-time.
An approved training course in England includes Foundation Learning Programmes or Programme Led Apprenticeships - not apprenticeships offered by way of employment.
Programme Led Apprenticeships
Young people that were on a Programme-Led Apprenticeship were entitled to Education Maintenance Allowance (EMA) which consisted of maximum payments of £30 per week. Under this scheme Child Benefit etc was not affected, however, the young person had to make do with just £30. The Government has now stopped this scheme - applications are no longer being accepted.
Programme Led Apprenticeships
Young people that were on a Programme-Led Apprenticeship were entitled to Education Maintenance Allowance (EMA) which consisted of maximum payments of £30 per week. Under this scheme Child Benefit etc was not affected, however, the young person had to make do with just £30. The Government has now stopped this scheme - applications are no longer being accepted.
Soon after the ending of EMA followed the removal of Programme Led Apprenticeships which too are no longer offered. Instead the child has to find employment, be paid £2.50 an hour, and their parent's lose their Child Benefit payments for them. The National Apprenticeship Service (NAS) reported in April 2011 that:
It is not the intention to fund any new Programme-Led Apprenticeships after 6 April 2011.
In preparation for these changes, from August 2010, the NAS will only fund new Programme-Led Apprenticeships where the programme-led element is for a period of six months or less.
Where a learner secures employment within the six month period that Programme-Led Apprenticeship can be converted into an Apprenticeship funded by NAS.
However, NAS funding will cease at the six month stage for any new Programme-Led Apprenticeships contracted in 2010/11 where the learner has not been successful in securing employment.
Recent Case Study
Rachel is a single parent with one child, a son called Jamie. Recently after six months of training doing an NVQ level 2, Jamie was moved from a programme-led apprenticeship (which he started when he was 16 whilst working as volunteer in a work-placement), to an "Employer-led" apprenticeship (still working at the same place) but his EMA payments were stopped and his employer began to pay him the apprenticeship wage of £2.50 per hour. Jamie was initially very excited by this, as £95 a week is a lot of money to him (he works 38 hours a week).
Rachel also works full time but because she is paid a low wage, her earnings are topped up with Working Tax Credits, Child Tax Credits and Child Benefit for Jamie. Because Jamie now receives the £2.50 an hour apprenticeship wage, Rachel is no longer entitled to receive Child Benefit or Tax Credits.
Rachel was not told this at the time- instead she thought that because her son was still on the same course as he was when he initially turned 16, she would still be entitled to receive Child Benefit for him and that there was no change of circumstance to declare. She was therefore very shocked to receive notification from the Child Benefit office telling her that she was no longer entitled to receive payments - and worst still, she had incurred an overpayment of three months.
Shortly after receiving that news, HMRC contacted her to inform her that she is no longer entitled to receive Child Tax Credits and because of her earnings (which are less than £15,000 a year) she is no longer entitled to receive the Working Tax element either (as a single person with no dependants) . She is also faced with an overpayment of Tax Credits - because these should have stopped at the same time as her entitlement to Child Benefit.
Therefore, not only has Rachel's income (which was already very low) dropped even further, but she is faced with a debt of hundreds of pounds in overpayments (three months of Child Benefit and Tax Credits). As a family consisting of just Rachel and her son, they are now spiralling into debt - as no doubt thousands of other families on low incomes who are faced with the same predicament are.
Rachel was not told this at the time- instead she thought that because her son was still on the same course as he was when he initially turned 16, she would still be entitled to receive Child Benefit for him and that there was no change of circumstance to declare. She was therefore very shocked to receive notification from the Child Benefit office telling her that she was no longer entitled to receive payments - and worst still, she had incurred an overpayment of three months.
Shortly after receiving that news, HMRC contacted her to inform her that she is no longer entitled to receive Child Tax Credits and because of her earnings (which are less than £15,000 a year) she is no longer entitled to receive the Working Tax element either (as a single person with no dependants) . She is also faced with an overpayment of Tax Credits - because these should have stopped at the same time as her entitlement to Child Benefit.
Therefore, not only has Rachel's income (which was already very low) dropped even further, but she is faced with a debt of hundreds of pounds in overpayments (three months of Child Benefit and Tax Credits). As a family consisting of just Rachel and her son, they are now spiralling into debt - as no doubt thousands of other families on low incomes who are faced with the same predicament are.
To make matters worse, Rachel and Jamie may have to move out of the small two-bedroomed apartment where they have lived for many years because it looks likely they will no longer be entitled to the small amount of Housing Benefit that they received (although just a small weekly amount - it made all the difference to Rachel and her son and enabled them to meet the full costs of their rent). They may have little choice but to move to a one-bedroomed flat, although sharing a bedroom with a 17 year old boy doesn't sound right though does it! But it is either that or they both give up their jobs and go onto benefits entirely (something Rachel says that she has tried very hard as a single parent to get away from).
For the first time Rachel is on a career path, as is her young son; it does not therefore seem right that they are being pushed further into poverty because they are working and are trying to better themselves.
For the first time Rachel is on a career path, as is her young son; it does not therefore seem right that they are being pushed further into poverty because they are working and are trying to better themselves.
Ironically, in May 2011, when talking of the new apprenticeship scheme for school leavers and young people, the Work and Pensions Secretary Iain Duncan Smith said: “The only route to a sustained reduction in poverty is through helping young people into work, not leaving them to a life on benefits.”
Even more ironic that one of the Government’s five priorities for action in supporting youth employment, and tackling some of the long term structural problems is to: "promote personal responsibility by ensuring that work pays".
Addressing Child Poverty Stuart Andrew, Conservative MP for Pudsey, said:
"That is why I am glad that the government are looking at precisely these areas,
with the introduction of the pupil premium, taking nearly 1 million of the lowest earners
out of tax altogether, and creating apprenticeship schemes and
vocational courses to help peopleget into work and out of poverty."
We, however, do not see how the apprenticeship scheme is "taking people out of poverty" paying them £2.50 an hour and taking away the parents Child Benefit and Tax Credits!?
