Can a sole director set up a childcare voucher scheme to take advantage of the tax/NIC saving on the vouchers to the nursery?
I am aware that by doing this they will therefore earn below the NMW but is there a different rule for directors?
Also, has anyone set up such a scheme and which providers would they recommend (obviously want to minimise costs on this).
Thanks for any answers
Replies (14)
Please login or register to join the discussion.
Directors dont come under the working time regulations or whatever its name is these days. NMW doesnt apply
are you aware though that the vouchers only help those paying tax to reduce the cost of the voucher? if they arent paying tax at the moment then it is a pointless excercise
What utter carp
are you aware though that the vouchers only help those paying tax to reduce the cost of the voucher? if they arent paying tax at the moment then it is a pointless excercise
Excuse the fish reference, but the above is complete spherical objects. It is a mechanism to extract £2,916 from the company, get CT relief on it, but for the individual to pay no tax. If they are incurring childcare costs then it is a complete no brainer.
Quite
are you aware though that the vouchers only help those paying tax to reduce the cost of the voucher? if they arent paying tax at the moment then it is a pointless exercise
Excuse the fish reference, but the above is complete spherical objects. It is a mechanism to extract £2,916 from the company, get CT relief on it, but for the individual to pay no tax. If they are incurring childcare costs then it is a complete no brainer.
rossmcv overlooks the possibility that this is not a salary sacrifice arrangement.
Questions
What is "the minimum amount" that the sole director is earning?If the sole director is the sole employee, why pay the charges of a voucher provider when the company could contract directly with the childcare provider?
Or Euan, the company could make its own vouchers.
The difference between vouchers and directly contracted is that the exemption for the former is £55 for each week that the employee has parental responsibility, whereas the exemption for the latter is up to £55 for each week that child care is provided.
If there are weeks when less than £55 of childcare costs are incurred (eg during school holidays, when one of the parents stays home), then you cannot accumulate your exemption with directly contracted childcare.
It is not necessary to use a scheme provider for the employer to provide the employee with vouchers, and vouchers saves problems with childcare providers that want to contract only with the parents, as well as giving a cumulative exemption.
Voucher Providers
All my childcare providing companies print their own vouchers.
No need to pay charges.
Yes, but ...
Portia, I take your point, but will the childcare provider be prepared to accept a piece of paper which is not a voucher from one of the established voucher companies?
Yes
Portia, I take your point, but will the childcare provider be prepared to accept a piece of paper which is not a voucher from one of the established voucher companies?
It hasn't been a problem so far.
It helps if the conversation goes something like this.
Parent - Here's a childcare voucher
Carer - Oh thanks. I'll stamp it.
Parent - While I'm here, I may as well redeem it. Here's a cheque.
Carer - Thank you. That's much quicker than dealing with these Childcare Voucher Companies.
It's all about confidence and prompt payment.
Euan, the employee is also the employer.
They turn up with a voucher in one hand and a cheque in the other. They give the childcare provider the "voucher" to pay for the childcare, and then hand them the cheque to redeem the "voucher", taking the "voucher" back in the process.
EDIT: Got interrupted mid-post and crossed with lionofludesch.
Increase director salary to £914.67
Process salary sacrifice deduction of £243.00
Net Salary for director remains unchanged.
Company gets CT relief on £2,916
Director gets Salary plus childcare vouchers
Most childcare providers now ask the payment to be BACS straight into their account, transfer this from the business bank account each month when taking salary.
Win.
(Keep all documents relating to the childcare scheme on file and if you have other employees - make them aware they can opt in)
EDIT: This is on a salary sacrifice basis.
Salary sacrifice is not necessary. Why increase the director's salary and then sacrifice part of that salary for vouchers. Why not just provide the vouchers and keep the salary the same, because you end up in exactly the same place. and it is their frigging company after all!
I should add to what I have said already, by confirming that I, speaking in a purely personal capacity, am in favour of drowning stupid people.