A guide to Employer Supported Childcare
From 6 April 2011 there are changes to the legislation regarding employer-supported childcare. These changes are set to affect employers who run a child voucher scheme and/or directly contracted childcare. These changes have no effect on the tax exemption and National Insurance disregard currently available for workplace nursery schemes.
The purpose of this change in legislation is to even out income tax savings available to all employees joining schemes whether on or after the 6 April 2011, regardless of the marginal tax rate that would otherwise be paid.
Unless otherwise specified the phrase ‘tax relief’ means relief for both income tax and the National Insurance disregard for employer contributions for class 1 (childcare vouchers) and class 1A (directly-contracted childcare) and for employee contributions for class 1.
To qualify for the tax relief you must meet four separate criteria which are:
1. The childcare vouchers or directly contracted childcare applies to care for a child who:
• Is a child or stepchild of the employee who is looked after(wholly or partially) at the expense of the employee or
• Is living with the employee and is a person who the employee has parental responsibility for.
2. The care must be qualifying childcare
3. The scheme must be open:
• To your employees in general or
• To those at a specific location (where the scheme is given through salary sacrifice or flexible remunerations arrangement, the condition can still be met if the scheme is not available to employees with earnings at or near National Minimum Wage).
4. If you join the scheme on or after 6 April then an estimate of relevant earnings amount for the tax year must have bee made at the required time.
Unless all these conditions are met the employer-supported childcare scheme will not qualify for tax relief.
Does Your Employee Qualify?
In order to qualify for the scheme, an employee must satisfy all 4 of the criteria above and must have submitted their application to be reviewed and accepted by the employer on or before 5 April 2011. Acceptance of the application means that the employee is eligible to receive childcare vouchers or directly contracted childcare and will then also qualify for tax relief as of that date.
Exempt amounts for childcare vouchers and directly-contracted childcare
*Note: the annually figure is based on a 53 week year
If you would like to know more about Employer Supported Childcare or discuss your company’s payroll, contact Robin Mead on 0800 018 0590 or firstname.lastname@example.org