Childcare Vouchers

JodieR

I feel a bit thick here but how does the childcare voucher scheme actually work? I've read the bumf here http://www.hmrc.gov.uk/childcare/childcarefactsheet.htm but it doesn't expalin how the 'voucher' bit actually works. Does the employer pay the nursery direct? does the nursery send their invoices to the employer? or is there actually a paper voucher which gets issued and redeemed? I don't understand!

jamesm96

Hi Jodie,

The link you've given does say that "paying an employee’s childcare bills on their behalf" is not allowed which is odd because the Employer Helpbook E18 then says that "the provision of directly contracted childcare up to the relevant exempt amount per employee" is allowed... I wonder if someone can clarify that?

However, you might find the helpsheet useful: http://www.hmrc.gov.uk/helpsheets/e18.pdf

If administering the vouchers themselves is too much of a hassle then there are all sorts of companies who can administer the vouchers for an employer... just google Childcare Vouchers.

clegganator

They could invoice the business direct. Or the employee gets an invoice, gives that to business and gets a cheque to give to nursery.

I don't think there is any right way of doing it, only a wrong one where the employee is given cash.

JodieR

Thanks Mike,

It all looks like such a minefield I think that the "paying an employee’s childcare bills on their behalf" is probably down to the name of who the nursery is invoicing - ie if an employee comes into work with an invoice made out to them and the employer pays it on their behalf then it doesn't qualify for the scheme but if the invoice was addressed to the employer then it would. but who knows - I may have that all wrong!

jamesm96

JodieR wrote: »

I think that the "paying an employee’s childcare bills on their behalf" is probably down to the name of who the nursery is invoicing - ie if an employee comes into work with an invoice made out to them and the employer pays it on their behalf then it doesn't qualify for the scheme

Of course, yes that'd make sense!

In which case it's probably easiest, isn't it, for the employer to arrange the care directly with the nursery?

deanshepherd

Direct care is the easiest method but many providers will not contract with anyone other than the parent of the child.

One of my kids has childcare with a provider who has a contract with my company and bills direct, the other is at a nursery who will not invoice direct so I have the absurdity of walking into their office every month and handing in my home-made childcare vouchers (in parent mode) which they immediately hand back to me for reimbursement (in employer mode) which I give them as a company cheque. What a faff!

payrollpro

Generally the payment of someone's childcare costs is determined to be meeting the pecuniary liability of the employee and hence it is not exempt. Meeting the cost of the care directly is only permitted if the employer is directly involved in providing the care, that is exempt so just having the invoice made out in the employers name won't suddenly make it qualifying.

Using an accredited childcare voucher scheme is usually allowed as long as it is with those providers who are registered with HMRC and fund care which satisfies the criteria. The way to tell is if the provider of the care accepts the vouchers, either the paper ones or electronic payment because if they don't then the scheme probably does not qualify and the vouchers won't be qualifying and hence not exempt.

In your case Dean, the problem sounds as though it lies with the provider but I agree HMRC doesn't help. I have some sympathy with their view that the scheme had to be set up this way to prevent bogus childcare facilities springing up.

Try this link http://www.hmrc.gov.uk/manuals/eimanual/EIM22030.htm as it defines care and qualifying care and links on to the other aspects of the scheme.

Even if it is a pain to deal with, as in Dean's case, and even though the tax relief is restricted to basic rate now, I still think this is a winner for both sides, but only if done through salary sacrifice.

Payrollpro

deanshepherd

As far as I am aware there is no such thing as an 'accredited childcare voucher scheme'. On this link, HMRC tell you how to do it all yourself and even provide you with a voucher template.

On the same link they tell you how to contract directly with a childcare provider - no need to have any involvement with providing the care either (you may be thinking of the workplace nurseries exemption).

JodieR

Thanks - that's all very helpful

KiddiVouchers

JodieR wrote: »

I feel a bit thick here but how does the childcare voucher scheme actually work? I've read the bumf here http://www.hmrc.gov.uk/childcare/childcarefactsheet.htm but it doesn't expalin how the 'voucher' bit actually works. Does the employer pay the nursery direct? does the nursery send their invoices to the employer? or is there actually a paper voucher which gets issued and redeemed? I don't understand!

Hi there,

After reading your confusion about childcare vouchers, I hope that you find the following information helpful:

What are childcare vouchers?

Childcare vouchers are a Government scheme designed to help working parents. Childcare vouchers are simply vouchers that you can use to pay for childcare, such as for nurseries, nannies or childminders. They can even be used to pay for after-school care and holiday play-schemes.

How do childcare voucher schemes help to save you money?

The vouchers can be provided by your employer, and are usually received instead of part of your salary through a system known as ‘Salary Sacrifice’. Unlike your salary, you don’t have to pay any tax or National Insurance on childcare vouchers, and that’s how you make the savings. Basic-rate taxpayers can order up to £243 a month of childcare vouchers, while higher-rate taxpayers can order up to £124 a month.

How do childcare voucher schemes work?

Employers usually appoint a childcare voucher provider to administer their childcare voucher scheme. Childcare voucher schemes vary depending on the voucher provider.

Normally, employees order their childcare vouchers directly from the childcare voucher provider. The childcare voucher provider will then invoice the employer for the cost of their employees’ vouchers, plus an admin fee. The employer will then reduce each employee’s gross salary by their voucher amount, and pay the childcare voucher provider’s invoice. Following the employer’s payment of the invoice, the childcare voucher provider will take responsibility for releasing the childcare vouchers to their employees. Usually parents are provided with an online childcare voucher account, which their childcare vouchers are credited to on or around their normal payday. It is usually then up to the parent to set-up how they wish to pay their carer. Most childcare voucher providers give parents the option of paying their carer with e-vouchers (online payments) or paper vouchers. If a parent chooses to pay their carer with e-vouchers, this money is usually directly transferred into the carer’s bank account, at a frequency of the parent’s choice. Most providers offer automatic, regular or ad-hoc payment facilities. If the parent chooses to pay their carer with paper vouchers, these can usually be sent to the parent by post, or can be downloaded and printed. The parent then needs to give the paper voucher to the carer. Usually paper childcare vouchers include a redemption code for the carer to quote to the childcare voucher provider to redeem the voucher.

Are there any requirements for joining a childcare voucher scheme?

You can only use childcare vouchers if your employer is willing to sign up for the scheme. This, however, is not usually a problem as childcare voucher schemes benefit employers too. By providing a childcare voucher scheme, your employer can save up to £402 a year in National Insurance for every parent who uses childcare vouchers.

The only requirements for joining the scheme are that you have an eligible child, and that you have enough salary to sacrifice without your remaining salary falling below the minimum wage.

How can you get started with childcare vouchers?

You can usually sign up for childcare voucher schemes online, by phone, or by post. Registration for the scheme is very simple; it usually only takes 10 minutes and there’s no claim forms.

Hope that helps,

KiddiVouchers