An employee earns less than £8500 and the employer pays for her childcare costs, is this a BIK for the employee? The Government website isn't very clear, it implies that there is no BIK if the employee earns less than £8500, but I seem to recall that any benefits have to be added to salary to see if this takes the 'earnings' over £8500, in which case the benefits are taxable. Does this apply to payment of childcare costs? The payments are to an external childcare provider (local nursery).
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No benefit
Assuming the childcare costs are no more than £55 per week, there is no benefit.
From guidance on website
Commercial childcare for employees earning at a rate of less than £8,500 per year - You don’t have to report or pay anything for these employees if you contract directly with a childcare provider, regardless of the cost of the childcare.
Important point - at a rate of is calculated as
Employee’s earnings during the year + Value of any expenses or benefits you’ve given them during the year.
Work out the full-year equivalent if they didn’t work the full year.
So if as you say the childcare takes them above the £8,500 threshold then yes there's a BIK unless amount paid is less than £55
The important point from the above
Is that the exemption only applies to childcare where the employer contracts directly with the childcare provider, and for vouchers.
If the employee is just paying childcare costs that have been contracted by the employee, it is ALL treated as pay for NIC purposes, and will ALL need to be reported on a P9D or P11D for tax purposes.
Could be better
This could be arranged better, though if there's no other source of income, the employee may have no tax liability anyway.
More information needed really.