Childcare voucher scheme for a director earning the minimum amount

Childcare voucher scheme for a director earning...

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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)

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By rossmcv
11th Feb 2016 10:20

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

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Replying to Paul Crowley:
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By chicka
11th Feb 2016 10:26

Yes I am aware of the tax/nic savings - wondered whether it was worth increasing the pay to the voucher amount (£243x12) and then the company will save CT on this of £583.20 and the director doesnt have to pay £243 of the vouchers out of their own pocket.

Would this work do you think? 

Many thanks

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Replying to Paul Crowley:
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By Portia Nina Levin
11th Feb 2016 10:37

What utter carp

rossmcv wrote:

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.

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Replying to SXGuy:
RLI
By lionofludesch
11th Feb 2016 10:50

Quite

Portia Nina Levin wrote:

rossmcv wrote:

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.

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Euan's picture
By Euan MacLennan
11th Feb 2016 10:38

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?

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By Portia Nina Levin
11th Feb 2016 10:43

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.

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RLI
By lionofludesch
11th Feb 2016 10:48

Voucher Providers

All my childcare providing companies print their own vouchers.

No need to pay charges.

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By Euan MacLennan
11th Feb 2016 10:52

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?

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Replying to Wilson Philips:
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By lionofludesch
11th Feb 2016 11:23

Yes

Euan MacLennan wrote:

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.

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By Portia Nina Levin
11th Feb 2016 11:42

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.

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By minhaz
11th Feb 2016 12:26

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.

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By Portia Nina Levin
11th Feb 2016 12:38

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!

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By Portia Nina Levin
11th Feb 2016 12:40

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.

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By chicka
12th Feb 2016 09:22

Thankyou so much for all the answers - I really appreciate it.

Is there a template somewhere I can use for the vouchers, and does the scheme need to be agreed with HMRC or can they just start giving the vouchers from the end of this month?

Many thanks

Chicka

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