What seems a very long time ago (it was in fact only the 28th August) I updated this blog on the subject of the Childcare Vouchers Consultation document that had recently been issued by HMRC. I did promise to add to that post, but events have rather got away from me, and it’s only now that I can surface and look afresh at this subject.

The first thing to mention is that the Consultation concluded only this week. So we are now in the “waiting” stage until we receive an official response as to the next steps in this process. According to the indicative timetables in the document, the response will be published in “Autumn” 2013. Those familiar with the workings of Government will be aware that Whitehall only appears to have two seasons in any given year (the other being Spring), each of which last for around 6 months, so don’t expect a result to be out any time soon.

The actual legislation to enact the replacement scheme is targeted to be completed by Spring 2015. It’s worth pointing out that, if left that late, it might be questionable whether it will actually take place during the term of the current Government (a general election is also scheduled for that time). The new scheme is, of course, targeted to go live in Autumn 2015.

So plenty of uncertainty in the timetable, but is there any new knowledge that I can add to the general background noise for our followers right now?

I believe there is. As I mentioned in my early post on this subject http://goo.gl/pWuEIr the actual detail of the proposals look really, really complex to my humble eye. Now some of this may of course come out in the wash, but certain elements are worth picking up at this time as follows:

1) What’s it worth?

According to the Consultation document, the benefit will be:

“20 per cent of working families’ childcare costs, subject to an annual limit of £1,200 contribution from the Government for each child. This is equivalent to basic rate tax relief of childcare costs up to £6,000 a year”

So this could be worth someway more to some families than the current Childcare Vouchers offerings, but for most that can continue to claim it will be a very similar level of saving (and still well worth having).

2) Who can benefit from this?

The Consultation document says;

“Households in which all parents work but do not receive support through Tax Credits (or Universal Credit) will be eligible for Tax-Free Childcare, so long as neither parent is an additional rate taxpayer.”

A couple of points to note here. Working single parent families will be able to claim, and so too will couples who both work, as long as they are below the very top rate of tax (which is currently around £150,000 per annum).

However two parent, one earner families cannot claim. My current reading is that this may even extends to families where one parent has lost their job. This enforced change of status from two earners to one earner might preclude that family from continuing to claim the benefit in some circumstances (although allowance is made for carers, those requiring hospital treatment etc). Hard to tell the precise outcomes here, so will watch the Consultation response on this one closely.

3) How many families will this help in the UK?

The aim is to extend Government support in this area from the current 0.5 million families, to 2.5 million. So a significantly improved reach for the new offering.

4) What about the child’s age limit?

The Consultation document confirms that initially;

“children up to age 5 will be eligible for Tax-Free Childcare - scheme eligibility will increase by one year, each year until all children under 12 can benefit from the new scheme”.

Which sounds fair enough, until you spot that if your child is born before September 2010, you will never be able to access this State support for Childcare costs, as children also have a tendency to also increase their age “by one year, each year”.

So, quite a bit more detail here, yet plenty of uncertainty also. I will however leave you with one final comment from the Consultation document which I think of importance to employers. Recognising that some existing voucher users will be worse off under the new proposals, the document boldly states:

“Current members of Employer Supported Childcare Schemes may choose to remain in their current Employer Supported Childcare Scheme or switch to Tax-Free Childcare if they wish.”

Now this, I have to say, misses the point. Yes, an employee can continue post 2015 in their current employer’s Childcare Voucher offering, but ONLY if the employer is willing to continue offering this facility. And as we have already seen, many employers seem rather keen, and in some cases even eager, to dispense with offering Childcare Vouchers at the earliest possible moment.

Until the dust settles on the Consultation and it’s response, I would encourage employers to continue offering Childcare Vouchers. Once the final detail is known it will be much easier to make a sensible business decision based on the facts and differences between the new and old offerings.

Best regards

Steve