Childcare Vouchers

Childcare Vouchers

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Husband and wife company client (both directors no other employees) are about to send their child to nursery and have asked about the company paying towards the childcare costs. What is the best way of doing this in practice? Can they be paid their usual minimal directors salary and the company pay a separate standing order directly to the nursery for £243pm or is it better to increase their monthly salaries and deal with via salary sacrifice? From an admin point of view I suspect a monthly standing order to the nursery would be easier but does this cause any BIK issues or HMRC registration issues?

To complicate matters further at this point I am not sure if they will be basic rate or higher rate taxpayers for 2014/15 as this will depend on the dividends they take. Does this matter?

Also if one of the directors decided not to take a salary from the company at some future point can the company still contribute in respect of that director?

Thanks

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Euan's picture
By Euan MacLennan
17th Apr 2014 12:10

Is that 5 questions?
The company should contract with the childcare provider who should invoice the company.  There is no point in incurring the handling charges from childcare voucher companies or in the hassle of preparing DIY vouchers.If the shareholding directors are already taking a minimal salary, there is no point in a salary sacrifice.I would be surprised if the childcare costs are identical from one month to the next, so a standing order would not usually be appropriate.  Just pay by electronic transfer or even, by cheque.There is no need to restrict the payment to £486 a month.  Any excess over this will be reportable as a benefit in kind on forms P11d, but there is no requirement to report payments up to £486 a month.The earnings assessment is based on the gross pay plus taxable benefits.  Dividends are not included as earnings.

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By SE
17th Apr 2014 15:02

Childcare Vouchers

Thanks Euan

More thoughts were springing to mind as I typed the original question as often happens.

Is it Ok for the company to pay the childcare provider say £243 in respect of a shareholding director who receives no salary just dividends or is it limited to payroll employees?

Thanks again

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Euan's picture
By Euan MacLennan
17th Apr 2014 18:12

Unpaid directors

Even unpaid directors are employees or at least, office holders, so there is nothing to prevent an employer paying for childcare for a director without a salary, provided that the benefit is offered to all employees.

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