I spent a reasonable chunk of yesterday afternoon reading through the Childcare Vouchers consultation that I mentioned on this blog at the start of the holiday season.
My initial thought is that the consultation (and the proposals) are both a lot more detailed, and much more complex, than I ever expected. At first glance it appears that every effort has been made to make this simple concept as challenging as possible, and as such I will be feeding the fruits of my research in manageable chunks into this blog (and of course at our seminars and events) over the coming months.
So let’s start with today’s nugget of knowledge, and that is the role that employers will be required to play in the new system. The consultation document states in Chapter 1:
“The Government has committed to explore how employers can continue to play a role in supporting their employees with childcare costs under Tax Free Childcare”
Although the above sentence is laced with qualifying terms, it is clear that the Government still see a role for employers in this area. Incidentally, the term “Tax Free Childcare” is the terminology being used for the replacement to employer supported Childcare Vouchers from 2015.
Later in the document, there is a table outlining the employer duties/roles under the old, and proposed new, regimes (which I have copied below for your information):
| [Current Childcare Voucher System]
Employer requirements under Employer-Supported Childcare |
[Proposed new Vouchers from 2015]
Potential employer role in Tax-Free Childcare |
| Advertise scheme and ensure it is open to all staff.
|
Could provide information to employees on how to access Tax-Free Childcare, particularly to new joiners or returners.
|
| Establish salary sacrifice or salary plus arrangements.
|
Could offer to continue to buy vouchers for employees. Deductions from payslips would be after tax instead of salary sacrifice – and unlike Employer-Supported Childcare there would be no NICs relief for employers. Employers could also choose to contribute towards childcare costs, though this may be considered a benefit in kind.
|
| Make bulk monthly payments to providers with information as to which parents payments relate to. | Employers might consider buying vouchers on behalf of parents in bulk if that puts them in a position to exploit economies of scale to benefit their employees. |
| Pay administration fee to voucher provider. | Chapter 5 outlines different approaches to fees. Under some options, employers may offer additional childcare support as part of their remuneration offer to employees, subject to the taxable benefit-in-kind position that might apply to these costs. |
| Administrative requirements for tax reporting, including conducting the Basic Earnings Assessment, | No Basic Earnings Assessment would be necessary. |
Yet this listing does not include one, very relevant, point. Employers can continue to offer access to existing members of the Employer Supported option after the new Tax Free Childcare provisions come into force. This is important, as the proposed new system will otherwise disadvantage many parents that are currently able to utilise Childcare Vouchers.
I would therefore suggest that an important role for employers from 2015 onwards will be making employees aware of the differences between the two systems, and allowing the existing plans to continue where needed. I will make this point to the consultation when I respond in September.
Best regards
Steve
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