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Childcare Tax Exemption

Childcare Tax Exemption

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As the Childvoucher scheme is not to open to new members, I am looking into the Tax-free childcare scheme.

Would my understanding be correct that there are no tax exemptions under ITEPA 03 for a company paying these for employees and any payments made would be classed as earnings subject to PAYE?

I cannot find a exemption and assume as the payments made by employees are topped u by 20% that is why no tax exemption available if employer made contributions. Is there another way to tax efficently sort out childcare now? Or are the other options, the company contracting directly with the nursery with a P11d benefit or a workplace nursery provided to all employees?

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By lionofludesch
07th Oct 2019 17:48

You're right.

It's purely a matter for the employee these days.

He can get £1 for every four he chips into his account.

Tax relief is much the same but there's no NI relief so, overall, it's generally not as good.

Unless you don't earn enough to pay tax.

Thanks (2)
By SteLacca
08th Oct 2019 09:32

The scheme works, effectively, on a net payment basis, with BR tax being added to the parent's contribution. Your proposal would effectively give double (or triple for HR, or possibly more for AR taxpayers) than was intended.

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By David Heaton
08th Oct 2019 14:38

If you consider the workplace nursery rules, watch out for the optional remuneration arrangements rules - if the worker gives up pay to get the benefit, the amount of pay 'sacrificed' may become the measure of the taxable BIK, rather than it being tax-free.

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