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Childcare vouchers - value vs salary sacrifice

I'm currently looking at setting a childcare voucher / salary sacrifice scheme. I am wondering if there is any requirement for the amount of the salary sacrificed to match the value of the vouchers provided.  Given that the employer saves NI contributions on any salary sacrificed, is it possible for the employer to pass on some of that saving and, for example, provide the employee with a £55 voucher in return for sacrificing £50 of salary?

Having read all the HMRC guidance I can find, I can't see any issue with doing this, but I can't find any other schemes operating this way.  I understand that the limits on what can be provided tax free relate to the value of the voucher provided.

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05th Sep 2012 16:07

Can't see a problem

There are no statutory rules for salary sacrifice arrangements because they aren't  "official" tax schemes. Therefore the employer can decide on the terms to offer. Just make sure the Is are dotted and the Ts crossed (HMRC's webpages indicate which Is and Ts they think are important - http://www.hmrc.gov.uk/specialist/salary_sacrifice.htm). 

Above all it must be done with the full understanding and consent of the employee. The decision earlier this year in the Reed case was an excellent example of what can go wrong if everyone isn't singing from the same hymnsheet. 

TC

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05th Sep 2012 16:56

No connection

There is no connection between employer funded childcare and salary sacrifice.

If you are the shareholding directors of a company and paying yourself £624 a month to avoid paying NIC, but still qualifying for state benefits, you would sacrifice nothing off your salary, but still let the company pay for the childcare.  For staff being paid normal salaries, it is usual to make the salary sacrifice the same amount as the childcare benefit, but there is no requirement to do so.

Incidentally, have you considered direct payment by the employer to the childcare provider in order to avoid the voucher company's handling charges?

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05th Sep 2012 18:24

Thanks for the confirmations.  I'd figured that was the case, but as you say, having the values the same seems to be very much the norm.

We're planning to issue our own vouchers rather than use a voucher company.  Currently we pay the childcare providers directly and it's actually a bit awkward as the providers are all set up to accept vouchers and get confused if you ask them to send you an invoice for a portion of the childcare.

 

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