Employer pays for Childcare

Employer pays for Childcare

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Hello.

I just need clarification on a childcare problem.

Employer pays direct for childcare and all registeration rules, etc are met. Employer has organised for the childcare. Exempt amount is £55 per week. The Revenue state the monthly equivilent is £243.

In month 1 childcare is paid for of £286. So £43 over the limit.
Next month childcare is only 3 out of 4 weeks and £200 paid.

Am I right in the fact that for month 2 the exempt amount is £243 (ie the monthly amount) not £55 x 3 because in this case childcare is paid monthly so the monthly exemtion applies despite the fact only 3 out of 4 weeks childcare?

If I am correct, can the £43 over the exemption for month 1 be covered by the £43 not used in month 2? My reasoning for this is that overall the employee has 2 months worth of exemption, even though one month over and one month under the monthly limit.

Month 3 = no childcare, then no £243 can be carried forward as there must be childcare "provided" to get the exemption.

Hope someone can help clarify this.
Mister E

Replies (6)

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By thehaggis
12th Jun 2007 21:54

Only to an extent

The Acts does not mention a monthly amount, only a weekly amount. The exempt amount is calculated annually, based on the number of qualifying weeks.

If childcare was provided for 3 weeks in the first month of the tax year, and nothing thereafter, the exempt amount would be £165 (3 weeks), not £243 (1 month).

I think that the monthly equivilent is for comparison when providing vouchers monthly rather than weekly - it refers to monthly paid staff, not monthly paid childcare bills.

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By thehaggis
11th Jun 2007 23:01

I think I agree
s318A says that the exempt amount in any tax year is £50 (now £55) per qualifying week - a qualifying week is one where care is provided.

If the childcare is provided for 50 weeks the exempt amount in that tax year would be £2750.

I think that the monthly equivalent stated by HMRC is for comparison purposes.

But I could be wrong...

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By User deleted
12th Jun 2007 07:51

I've never seen a specific reference to this...
... but £243 is the value of vouchers that may be issued tax free each month to the employee. It is then up to the employee and the childcare provider as to which bills they are used to settle.

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By AnonymousUser
12th Jun 2007 12:13

not vouchers
The trouble is these are not vouchers. This is a direct payment.

Vouchers are simplier

See http://www.hmrc.gov.uk/manuals/eimanual/EIM22010.htm
For vouchers the amount of £55 per week is in any week a voucher is "received" by ee. So as long as care in that week/month ee can have a voucher which ee can use when he wants.

BUT for direct payments it's when childcare "provided". Hence my query, in month 1 and 2 childcare "provided" so is exempt amount £243 x 2 even if payments are more than £243 in one month but less the next?

The Haggis seems to agree with me.

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By User deleted
13th Jun 2007 10:57

Am I missing something?
My understanding of the £55per week/£243 per month exemption was that if the employer provides childcare directly through a third party, a tax and NICs exemption similar to the one for childcare vouchers will apply. The first £55 a week of the cost of the childcare the employer provides will be exempt from tax and NICs and the same conditions that the scheme is generally available, for a qualifying child and for registered or approved childcare will apply.

So if the employer has contracted directly with the provider and pays them direct it is okay.

However, the exemption does not apply to paying an employee’s childcare bills on their behalf . If this is the case and the employer then makes a direct payment to the childcare provider should it not go on form P11D and through payroll to account for the Class 1NIC?


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By AnonymousUser
13th Jun 2007 11:35

ah I think I get it
First of all confused -
This is childcare that is provided direct so no tax/NI worries. But you are correct about the situation if it was just paid on their behalf.

Haggis - that is what I was getting at, I just used the monthly amount but take your point re weekly amount in legislation. Although HMRC do say the monthly equivilent is £243 I think you are right in that if 3 weeks provided only exemption is 3 x £55.

So on that basis, if 4 weeks childcare provided exempt is £55 x 4 = £220.
If company pays 1 month = £243, then £23 is taxable. ?

Also if 4 weeks exempt = £220 and childcare paid 2 weeks at £60, 2 weeks at £50 then overall still £220 paid so no taxable amount even though 2 weeks were over the weekly limit ?

Agreed?

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