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Can a Limited Company pay the cost of Childcare?

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A client has asked if they can put the cost of childcare though their limited company as an expense.

The company trade is painting and decorating, there are two directors (a couple with 3 children) and one employee in the company. The companies work involves a lot of travel with one of the directors and the employee traveling around the country for work. This leaves the second director at home to deal with all the bookkeeping and paperwork for which she receives a wage.

I have been asked if they can put the cost of childcare through the limited company to give the director time to complete the paperwork for the business.

My understanding is that childcare vouchers and childcare your employer arranges with a provider used to be schemes that your employer could provide but that these schemes are no longer available and that they have been replaced by Tax-Free Childcare.

Are there any other options to Tax-Free Childcare with a limited company?

Any advice would be appreciated.

Replies (5)

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By Duggimon
12th Sep 2019 13:24

There's always taxable childcare. The company can pay for anything at all for their employees so long as they pay tax on it as a benefit.

If you want a tax break on it though then I believe tax free childcare is your lot. Is there a reason this isn't any use to your client?

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Replying to Duggimon:
By Davis_21
12th Sep 2019 13:36

At the moment one of the directors is claiming working tax credit and the other director is claiming child tax credit.

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Replying to Davis_21:
By Payrollgal
12th Sep 2019 15:19

I find this strange.

Surely they have a joint claim?

Anyway, you are right in thinking that vouchers and directly contracted schemes don't exist for new entrants any more.

The business can remunerate them through the payroll for the cost of their childcare but then surely they will loose their tax credits as they will be earning much more. I can't understand why they think they can have tax credits to pay for childcare and also have the business pay for the childcare too.

Cake and eat it springs to mind here.

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Replying to Davis_21:
By SXGuy
12th Sep 2019 18:41

I think if they are a couple then there will be a lead claimant but the award will be for both not split between the two.

The award amount would vary depending on whether you pay for childcare yourself or whether the child was entitled to free child care.

So if your worried that claiming free child care would reduce your entitlement then you'd prob be correct but as someone else has said you can't have your cake and eat it.

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By meadowsaw227
13th Sep 2019 12:27

Err in the real world exactly how much "bookkeeping/admin" is involved in a 2 man decorating business , especially as the income must obviously be so low that they are both entitled to benefits !

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