Childcare vouchers
Discussion
Hoping for some advice about childcare vouchers, as the nursery mentioned it this morning.
Can I, as a partner in a business, take my share of profit in part as childcare vouchers (so paying no tax on them*)?
And does it have to be a recognised scheme or can I set up an arrangement with the nursery where they accept a voucher printed by me?
*Although I'm not sure they're tax free as such...
Can I, as a partner in a business, take my share of profit in part as childcare vouchers (so paying no tax on them*)?
And does it have to be a recognised scheme or can I set up an arrangement with the nursery where they accept a voucher printed by me?
*Although I'm not sure they're tax free as such...
Interesting point.
The aim of these schemes is for Employers to be able to pay for Child Care costs for their Employees. Directors of their own limited companies can also avail of this scheme.
Before being specifically allowed in 2005, the provision of Child Care/Nursery facilities by an employer would have attracted both a taxable Benefit and Kind and Class 1A National Insurance charges.
However, what happens if the entity is a sole trader or a partnership and the person receiving the child care voucher is one of the proprietors i.e. NOT an employee?
I may need to do some further research.
The aim of these schemes is for Employers to be able to pay for Child Care costs for their Employees. Directors of their own limited companies can also avail of this scheme.
Before being specifically allowed in 2005, the provision of Child Care/Nursery facilities by an employer would have attracted both a taxable Benefit and Kind and Class 1A National Insurance charges.
However, what happens if the entity is a sole trader or a partnership and the person receiving the child care voucher is one of the proprietors i.e. NOT an employee?
I may need to do some further research.
Only one person can claim.
The company pays for the vouchers and gives them to the relevant employee/director.
The company claims the cost of the voucher as a deductable business expense.
The employee/director will not suffer any Income Tax (under BIK rules) and the employer will not have to pay over any Class 1A NI (Employer's NI on Benefits) on the value of the voucher.
The voucher has to be from a recognised and licensed child carer/nursery. They cannot be "made up" by the business making the claim.
Many businesses are now offering these vouchers on a "salary scarifice" basis i.e. the employee takes an actual pay cut but the difference is made up by the issuing of a child care voucher up to the value of the pay cut.
This is not really in the spirit of the original idea and I am sure at some point this could lead to the abolition of such schemes. In nearly every other areas where employers have gone down the salary sacrifice route for employee incentives, the government have rescinded the legislation ( e.g. profit sharing, employer provided computers etc....)
The company pays for the vouchers and gives them to the relevant employee/director.
The company claims the cost of the voucher as a deductable business expense.
The employee/director will not suffer any Income Tax (under BIK rules) and the employer will not have to pay over any Class 1A NI (Employer's NI on Benefits) on the value of the voucher.
The voucher has to be from a recognised and licensed child carer/nursery. They cannot be "made up" by the business making the claim.
Many businesses are now offering these vouchers on a "salary scarifice" basis i.e. the employee takes an actual pay cut but the difference is made up by the issuing of a child care voucher up to the value of the pay cut.
This is not really in the spirit of the original idea and I am sure at some point this could lead to the abolition of such schemes. In nearly every other areas where employers have gone down the salary sacrifice route for employee incentives, the government have rescinded the legislation ( e.g. profit sharing, employer provided computers etc....)
I don't think it is possible for a partner or sole trader to use vouchers but I can provide some guidance for employees or directors.
The childcare voucher scheme must be set up by the employer, although a 3rd party can operate it for them if they wish. It is perfectly possible for an employer to set the scheme up themselves and produce the vouchers themselves.
If the husband and wife are both employed (not necessarily by the same company) they can each take vouchers up to a maximum of £243 per month.
A registered childcare provider must be used who has the appropriate registration number - you cannot use them to pay parents etc for looking after their grandchildren.
The scheme is entered into by salary sacrifice. The employee signs a salary sacrifice agreement for whatever value of childcare voucher they need (up to £55 per week or £243 per month) They then receive a voucher each week/month with their payslip which they use to pay for childcare. The carer sends the voucher to the employer with an invoice, which the empoyer then pays.
By using the vouchers, the employer saves 12.8% NI and the employee saves 20 or 40% tax and 11 or 1% NIC.
I have set up quite a few schemes for clients and operate a few for them also. I think they are a worthwhile saving as the cost to set up the scheme is minimal and it can be operated very easily.
Hope this helps
The childcare voucher scheme must be set up by the employer, although a 3rd party can operate it for them if they wish. It is perfectly possible for an employer to set the scheme up themselves and produce the vouchers themselves.
If the husband and wife are both employed (not necessarily by the same company) they can each take vouchers up to a maximum of £243 per month.
A registered childcare provider must be used who has the appropriate registration number - you cannot use them to pay parents etc for looking after their grandchildren.
The scheme is entered into by salary sacrifice. The employee signs a salary sacrifice agreement for whatever value of childcare voucher they need (up to £55 per week or £243 per month) They then receive a voucher each week/month with their payslip which they use to pay for childcare. The carer sends the voucher to the employer with an invoice, which the empoyer then pays.
By using the vouchers, the employer saves 12.8% NI and the employee saves 20 or 40% tax and 11 or 1% NIC.
I have set up quite a few schemes for clients and operate a few for them also. I think they are a worthwhile saving as the cost to set up the scheme is minimal and it can be operated very easily.
Hope this helps
They also disagree over whether the employer can produce the vouchersEric Mc said:
Only one person can claim.
The company pays for the vouchers and gives them to the relevant employee/director.
The company claims the cost of the voucher as a deductable business expense.
The employee/director will not suffer any Income Tax (under BIK rules) and the employer will not have to pay over any Class 1A NI (Employer's NI on Benefits) on the value of the voucher.
The voucher has to be from a recognised and licensed child carer/nursery. They cannot be "made up" by the business making the claim.
Many businesses are now offering these vouchers on a "salary scarifice" basis i.e. the employee takes an actual pay cut but the difference is made up by the issuing of a child care voucher up to the value of the pay cut.
This is not really in the spirit of the original idea and I am sure at some point this could lead to the abolition of such schemes. In nearly every other areas where employers have gone down the salary sacrifice route for employee incentives, the government have rescinded the legislation ( e.g. profit sharing, employer provided computers etc....)
This sounds wrong..The company pays for the vouchers and gives them to the relevant employee/director.
The company claims the cost of the voucher as a deductable business expense.
The employee/director will not suffer any Income Tax (under BIK rules) and the employer will not have to pay over any Class 1A NI (Employer's NI on Benefits) on the value of the voucher.
The voucher has to be from a recognised and licensed child carer/nursery. They cannot be "made up" by the business making the claim.
Many businesses are now offering these vouchers on a "salary scarifice" basis i.e. the employee takes an actual pay cut but the difference is made up by the issuing of a child care voucher up to the value of the pay cut.
This is not really in the spirit of the original idea and I am sure at some point this could lead to the abolition of such schemes. In nearly every other areas where employers have gone down the salary sacrifice route for employee incentives, the government have rescinded the legislation ( e.g. profit sharing, employer provided computers etc....)
we have been happily designing and printing our own childcare voucher for years. you can buy them in but it's about £8, purely people outsourcing it...
There is a page on a .gov site about doing it yourself..
They also suggest salary sacrifice for with childcare vouchers
Are you confusing this with the TEDS scheme...
if you are doing some research.
if you were an employee of one comapny and a director of another. Could that one person, recieve childcare vouchers from both?
Can A partner in a partnership get them (ie produce their own)
B
Edited by BJWoods on Thursday 11th September 19:32
Amazingly, this is a truly rare event where Eric has got a couple of things incorrect:
HM Revenue & Customs provide their original documentation at:
http://www.hmrc.gov.uk/childcare/policy.htm
and specifically comment on provisions for salary sacrifice and childcare at:
http://www.hmrc.gov.uk/specialist/salary_sacrifice...
Eric Mc said:
Only one person can claim.
Both parents can claim. An individual can only claim £234 (a month) each though. Eric Mc said:
The voucher has to be from a recognised and licensed child carer/nursery. They cannot be "made up" by the business making the claim.
As previously pointed out, you can make up the vouchers yourself. But they can only be redeemed by a recognised and licensed child carer. Eric Mc said:
Many businesses are now offering these vouchers on a "salary scarifice" basis i.e. the employee takes an actual pay cut but the difference is made up by the issuing of a child care voucher up to the value of the pay cut.
This is not really in the spirit of the original idea and I am sure at some point this could lead to the abolition of such schemes. In nearly every other areas where employers have gone down the salary sacrifice route for employee incentives, the government have rescinded the legislation ( e.g. profit sharing, employer provided computers etc....)
This I'm pretty sure is an incorrect comment. The whole point of childcare vouchers is that they are designed to be used as salary sacrifice. This is "the spirit of the original idea"This is not really in the spirit of the original idea and I am sure at some point this could lead to the abolition of such schemes. In nearly every other areas where employers have gone down the salary sacrifice route for employee incentives, the government have rescinded the legislation ( e.g. profit sharing, employer provided computers etc....)
HM Revenue & Customs provide their original documentation at:
http://www.hmrc.gov.uk/childcare/policy.htm
and specifically comment on provisions for salary sacrifice and childcare at:
http://www.hmrc.gov.uk/specialist/salary_sacrifice...
mechsympathy said:
APguy this is the $100 question:
I can't find a definitive answer, so I guess back to Eric for that one. BJWoods said:
Can a partner recieve them in a partnership???!!!
(However I can't see anything that would prevent a partnership from issuing them). Why not give one of the voucher providers a call. Busy Bees or Accor for example.
My Accountant has been through the loop a few times on this. As a Director and employee of my company, this is what she said I need to do:
apguy said:
Both parents can claim. An individual can only claim £234 (a month) each though.
Totally agree.apguy said:
As previously pointed out, you can make up the vouchers yourself. But they can only be redeemed by a recognised and licensed child carer.
As long as you can get a puker Invoice i.e. directed at your company with details of the childcare itself (i.e. name of child, hours, rate etc) from a licensed nursery/pre-school, then this is sufficient to put it through your books with no additional paperwork (i.e. producing vouchers etc) or contact needed with the Revenue to approve the scheme.apguy said:
The whole point of childcare vouchers is that they are designed to be used as salary sacrifice. This is "the spirit of the original idea".
Totally agree. I reduce my gross monthly pay by the amount of the previous months childcare costs - up to the limit mentioned above of course. This then saves a small amount on Tax and NI for no extra paperwork - well other than putting 1 extra invoice a month in my books. I then simply give the pre-school a company cheque.Edited by thegreengoblet on Friday 12th September 09:46
I have to say that this is not an area I had looked into a great deal (pretty obvious, really) .
I wasn't saying that the government are against the salary sacrifice angle (indeed, they are genuinely encouraging it in this case). Howerver, you never know what they will do in the future - especially when they feel that the salary scarifice system is being abused - and they start counting the cost of the lost revenue from tax and NI.
Nearly every other salary sacrifice scheme that was ever brought in was eventually shut down.
Again, without doing the research, the "tax break" that a sole trader or a partner migt obtain from child voucher schemes would be the claiming of the child care costs as a legitimate business expense in the sole-trader or partnership accounts. This would reduce the taxable trading profits on which the sole trader or partner is eventually taxed.
I wasn't saying that the government are against the salary sacrifice angle (indeed, they are genuinely encouraging it in this case). Howerver, you never know what they will do in the future - especially when they feel that the salary scarifice system is being abused - and they start counting the cost of the lost revenue from tax and NI.
Nearly every other salary sacrifice scheme that was ever brought in was eventually shut down.
Again, without doing the research, the "tax break" that a sole trader or a partner migt obtain from child voucher schemes would be the claiming of the child care costs as a legitimate business expense in the sole-trader or partnership accounts. This would reduce the taxable trading profits on which the sole trader or partner is eventually taxed.
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