Childcare vouchers

Childcare vouchers

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A husband and wife both actively work for a company (they are not shareholders of the company). The company is now offering to all employees £50 per week of childcare vouchers. They only have one child. Can both employees receive £50 per week each tax & NIC free?
Gary

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By NeilW
12th Oct 2005 20:02

With the greatest respect Adam
I think you may have got hold of the wrong end of the stick.

*All* qualifying childcare vouchers issued by employers under the £50 per week limit are exempt from tax regardless of whether there is a salary sacrifice or not. Section 270A, as introduced in FA 2004, exempts them from tax.

Salary sacrifice is merely a device that allows an employer/employee to change their contract and swap salary for tax free childcare vouchers, thereby avoiding putting the wage bill up by £50 for every employee who takes up the offer. It's a commercial device primarily, with a secondary tax effect - hence why the Revenue are so interested in checking that it has been executed correctly.

As to the NMW argument, tax law requires that all emoluments to directors are brought under ITEPA.. There is nothing in law stopping a director voting themselves childcare vouchers, any more than there is one stopping them voting themselves a yacht. Emoluments come in all shapes and sizes. That doesn't create an employment contract. ITEPA S5 makes a director an 'employee' for the purposes of that act only.

NeilW

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By adamsgi
12th Oct 2005 17:50

Adding Vouchers on to salary
You are more than able to offer the vouchers in addition to the employees current salary, however the vouchers are then classed as a Taxable benefit, and you would have to produce a P11d/P9d. They are only non taxable/niable if you perform a satisfactory salary sacrifice.

If you do it anyway, but don't record the vouchers as a taxable benefit, if the Inland Revenue find out, you will be responsible for paying the tax and NI due on the benefit.

Adam
www.armstrongpayrollsolutions.co.uk

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By AnonymousUser
08th Oct 2005 11:40

What about director/shareholders?
If the directors are employees then presumably they are entitled to £50pw tax-free? However, if this is claimed are the directors blowing their remuneration strategy (in part) by bringing them into NMW rules by virtue of fact that they are no longer carrying out duties as officers but as employees.

Would an employment contract requiring the director to work, say, 16 hours per week @ NMW wage level solve the problem, the remaining time/duties being carried out as officer?

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By adamsgi
08th Oct 2005 17:03

Don't quote me on it.....
It is possible in principal I suppose. One problem would be that the employment contract would have to be 16 hrs @ NMW plus the value of the Vouchers (in this case £50 worth would mean an extra £3.13ph), as a salary sacrifice cannot take you below the minimum wage.

The other bone of contention is that you have to have your salary sacrifice in place and running before HMRC will comment on whether it is sufficient for tax law. If not then the vouchers are taxable benefits. The scenario you mention for the directors is a minefield, and I haven't seen any direct guidance on it. If it were me, I wouldn't bother!

Adam Armstrong
www.armstrongpayrollsolutions.co.uk

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By User deleted
09th Oct 2005 17:26

Not sure what the problem is ..

Why do you need to do a salary sacrifice for the directors?

Surely their fee for the office is the pay that they were getting plus the childcare vouchers.

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By AnonymousUser
10th Oct 2005 09:47

Agreed, hxj
Everyone (exepct hxj and me) seems to assume that childcare voucher schemes necessitate a salary sacrifice. This may be the preferred option when dealing with 'normal' employees so that their gross package is unchanged but surely there is no legal requirement. If the employer feels so disposed what is to prevent him adding the vouchers to existing remuneration?

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By adamsgi
06th Oct 2005 17:55

Childcare Vouchers allowance
Yes they can. The salary sacrific is per employee, not per child. This is shown in the fact that if an employee has four children, they cannot claim the allowance three times. Both parents have the right to claim it for the same child.

Adam Armstrong
www.armstrongpayrollsolutions.co.uk

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