There have been a number of questions this month regarding the closure of the UK’s Employer Supported Childcare schemes - that is, childcare vouchers and directly-contracted childcare - to new entrants. The last day for employees to be eligible was 4 October 2018 and, understandably, the situation has generated a few queries that I will tackle here:
- With the closure of childcare vouchers, will it still be necessary to undertake a Basic Earnings Assessment (BEA) for those employees who are already in the scheme?
Unfortunately, as long as the Employer Supported Childcare voucher scheme is still going, you will be required to perform a BEA on those who entered the scheme on, or after, 6 April 2011.
- Does the scheme’s closure affect the workplace nursery that we operate?
The term ‘workplace nurseries’ refers to when employers provide places for their employees’ children in an employer-managed and financed nursery. The nursery may be either on- or off-site and attendance is subject to certain qualifying conditions.
The changes to the Employer Supported Childcare scheme do not affect any workplace nursery provision, and the cost of such provision is not subject to either income tax or National Insurance contributions, regardless of the cost.
- One of our employees said they believed they would be better off under the government’s scheme than in our childcare voucher programme. What is the best way for them to leave or do I need to remove them myself?
This kind of activity needs to take place via the Childcare Account Notice (CAN), which is new terminology in the payroll lexicon. If an employee has made a considered decision to opt for tax relief on childcare costs via Tax-Free Childcare, they must submit a CAN to their employer within 90 days of opening a Childcare Account. As there is no prescribed format for the CAN, they can do so simply by sending an email indicating that they do longer wish to continue in the voucher scheme.
But it is worth noting that once that a CAN has been submitted, it amounts to a full and final end to Employer Supported Childcare (the voucher in your case) for the employee concerned. They cannot revoke the decision once it has been carried out.
Given that they have 90 days’ grace after opening a Childcare Account though, they would be advised to continue with the voucher and Tax-Free Childcare before submitting the CAN. Although it is not possible to obtain tax relief on both schemes, it is feasible to repay tax relief into the Childcare Account and carry on with the voucher.
- Where can employees go to find out if they would be better off staying with our directly-contracted scheme or moving to a government one?
Employers should be very careful about advising employees – and I say that from experience. I once told a friend that his pension scheme appeared to have very good contributions rates when compared with many.
But he took it to mean that I was advising him to sign up to it, and he suggested that all his colleagues in the canteen do the same. I quickly explained that I was not an advisor and so could not recommend him, or anyone else, to join the scheme but had simply stated that his employer made high contributions. I also asked him to tell his colleagues that too.
The reason I cite this example is that any of us rarely have all the facts behind a given situation and, therefore, should refrain from handing out advice, especially in relation to important decisions - and the same applies to Tax-Free versus Employer Supported Childcare.
On the other hand, it does not mean we cannot steer employees to places where they can obtain guidance for themselves. One of my favourite comparison websites is Martin Lewis’ MoneySavingExpert.com, which compares the benefits of Tax-Free Childcare with those of childcare vouchers. The same concept also applies with childcare that has been contracted directly.
Ian Holloway is head of legislation and compliance at Cintra HR and Payroll Services. He was involved in processing payrolls large and small from organisations across all sectors until 2011 when he started helping to educate the profession by developing course material, newsletters and face-to-face presentations.
OTHER ARTICLES THAT MAY INTEREST YOU
UK closes new entry to childcare voucher schemes
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There have been a number of questions this month regarding the closure of the UK’s Employer Supported Childcare schemes - that is, childcare vouchers and directly-contracted childcare - to new entrants. The last day for employees to be eligible was 4 October 2018 and, understandably, the situation has generated a few queries that I will tackle here:
- With the closure of childcare vouchers, will it still be necessary to undertake a Basic Earnings Assessment (BEA) for those employees who are already in the scheme?
Unfortunately, as long as the Employer Supported Childcare voucher scheme is still going, you will be required to perform a BEA on those who entered the scheme on, or after, 6 April 2011.
- Does the scheme’s closure affect the workplace nursery that we operate?
The term ‘workplace nurseries’ refers to when employers provide places for their employees’ children in an employer-managed and financed nursery. The nursery may be either on- or off-site and attendance is subject to certain qualifying conditions.
The changes to the Employer Supported Childcare scheme do not affect any workplace nursery provision, and the cost of such provision is not subject to either income tax or National Insurance contributions, regardless of the cost.
- One of our employees said they believed they would be better off under the government’s scheme than in our childcare voucher programme. What is the best way for them to leave or do I need to remove them myself?
This kind of activity needs to take place via the Childcare Account Notice (CAN), which is new terminology in the payroll lexicon. If an employee has made a considered decision to opt for tax relief on childcare costs via Tax-Free Childcare, they must submit a CAN to their employer within 90 days of opening a Childcare Account. As there is no prescribed format for the CAN, they can do so simply by sending an email indicating that they do longer wish to continue in the voucher scheme.
But it is worth noting that once that a CAN has been submitted, it amounts to a full and final end to Employer Supported Childcare (the voucher in your case) for the employee concerned. They cannot revoke the decision once it has been carried out.
Given that they have 90 days’ grace after opening a Childcare Account though, they would be advised to continue with the voucher and Tax-Free Childcare before submitting the CAN. Although it is not possible to obtain tax relief on both schemes, it is feasible to repay tax relief into the Childcare Account and carry on with the voucher.
- Where can employees go to find out if they would be better off staying with our directly-contracted scheme or moving to a government one?
Employers should be very careful about advising employees – and I say that from experience. I once told a friend that his pension scheme appeared to have very good contributions rates when compared with many.
But he took it to mean that I was advising him to sign up to it, and he suggested that all his colleagues in the canteen do the same. I quickly explained that I was not an advisor and so could not recommend him, or anyone else, to join the scheme but had simply stated that his employer made high contributions. I also asked him to tell his colleagues that too.
The reason I cite this example is that any of us rarely have all the facts behind a given situation and, therefore, should refrain from handing out advice, especially in relation to important decisions - and the same applies to Tax-Free versus Employer Supported Childcare.
On the other hand, it does not mean we cannot steer employees to places where they can obtain guidance for themselves. One of my favourite comparison websites is Martin Lewis’ MoneySavingExpert.com, which compares the benefits of Tax-Free Childcare with those of childcare vouchers. The same concept also applies with childcare that has been contracted directly.
Ian Holloway is head of legislation and compliance at Cintra HR and Payroll Services. He was involved in processing payrolls large and small from organisations across all sectors until 2011 when he started helping to educate the profession by developing course material, newsletters and face-to-face presentations.
OTHER ARTICLES THAT MAY INTEREST YOU
UK closes new entry to childcare voucher schemes
Changes to UK salary sacrifice schemes destroying benefits value
Part-time working hits UK working mum's wages hard
