Tax free Childcare – Employers help from Jelf

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Here’s an important article written by Jelf, the MIA’s recommended financial consultancy firm…

Tax Free Childcare (TFC) was first mooted by the then Coalition Government as long ago as the 2013 Spring Budget speech.  It’s fair to say that progress of this initiative has been rather slow since then but, as we reported in April, Tax Free Childcare has now began for some parents, and from last Friday (24th November) has been extended to those with children under age 6.

So, with the new offering now a feature of the childcare support landscape, now is the time for employers to seriously look at this issue and the interplay with the existing Childcare Voucher (CCV) schemes which most good organisations already offer.  So where to start on this exercise?

Firstly, it is important to note that the two offerings are very different, and there are many situations where Childcare Vouchers may provide a better level of financial support than Tax Free Childcare (and indeed vice versa).  So it’s important that the working parents at your company understand the two offerings and make an informed choice.  The Government’s Childcare Choices website points parents towards the various components on offer (including other elements of support such as free nursery school places) but does not necessarily directly compare Tax Free Childcare with Childcare Vouchers.  For more information on some of the differences of the two offerings please take a look at this table from Childcare Vouchers provider Sodexo.

Having signposted your employees towards the above, it is likely that at least some will want to retain Childcare Vouchers as this offering may provide them with a better financial outcome.  This can be done as long as Childcare Voucher savings begin before April 2018.  I have been voicing this at events for some time now, and there have recently been a number of questions from delegates along very similar lines, so we think it may be appropriate to try and answer some of these common queries here.  Our answers are based on Sodexo’s current understanding of HMRC’s guidance and are, of course, subject to change as and when more detail becomes available.

So here are some of those questions and answers.  There are some other queries that we are still looking into and we will post up any additional information at a later date:

Question:  By what date must someone join Childcare Vouchers to retain that right? 

Answer:  A salary deduction must have taken place before the April deadline.  It seems reasonable to assume that March payroll deductions (for periods up to 5th April) will suffice.

Question:  Can contributions increase post the above deadline?

Answer:  An employee is able to change their amount post April 2018 in the way they currently can.

Question:  Is an employee able to retain the right to Childcare Vouchers if they change jobs after April 2018?

Answer:  The on-going right to Childcare Vouchers ends with a change of employer.

Question:  What happens if an employee is currently not paying into Childcare Vouchers (perhaps because they are currently on maternity leave) but wants to retain the right to Childcare Vouchers? 

Answer:  Employees already in a Childcare Vouchers scheme continue to be eligible provided that they have made a salary sacrifice contribution in the 52 weeks prior to the closure of the CCV scheme to new entrants.

Question:  What happens if an employee with Childcare Vouchers subsequently wants to change to Tax Free Childcare? 

Answer:  When an employee wants to leave the Childcare Voucher scheme to join TFC, they must provide their employer with a Childcare Account Notice (CAN), which is an official request to leave the CCV scheme to join TFC.

All the above information is provided for information only and does not constitute advice or guidance.  We would strongly suggest that each and every employer and parent makes formal representations to their own Childcare Voucher provider to ensure that they remain on the right side of the new rules.

Finally, it is worth mentioning that there is still some political pressure to extend the deadline for Childcare Vouchers beyond April 2018.  The House of Commons Petitions Committee has agreed to schedule a debate on the petition to keep Childcare Vouchers open on Monday 15th January 2018 at 4.30pm. The debate will be held in Westminster Hall, the second debating chamber in the House of Commons and will be led by Catherine McKinnel MP.

If you need any help with this issue, the MIA-recommended financial consultancy firm is Jelf. – www.jelfgroup.com/ – they provide expert advice to both businesses and individuals on matters relating to insurance, healthcare, employee benefits and financial planning