Tax Free Childcare Account - Are accountants to blame?
Trying to catch up on the Test Cricket in the West Indies I accidentally fell upon a discussion on the radio whilst driving to work concerning the alarming apathy towards the Tax Free Childcare (TFC) scheme. It would appear that as at the end of October 2018 only 235,000 TFC accounts had been opened. The take up has been so low it has been alleged that a third of the monies set aside by the Government to meet their share of the cost to pay for this scheme has been allocated elsewhere. Presumably to pay for all these trips to Brussels!!!
The radio debate tried to analyse why this was the case and came up with a myriad of views:
a) The roll out of the scheme has been staggered since its launch in April 2017 which meant that parents of kids of a certain age group could not access the scheme early on.
b) The childcare voucher scheme (CCV) arrangement for new entrants only came to an end in October 2018.
c) For parents in the CCV scheme it may not be cash beneficial for them to jump ship into the TFC scheme. Some parents may not have even checked to see if it was of benefit to do so. Our ProActivTax members have a calculator which can check that for their clients.
d) The Government do not appear to have ploughed vast sums into promoting this new scheme. The cynic within me suggests it might not be in their financial interest to do so.
e) In some instances, either due to the age of the child or the eligibility of the parents or both, they do not fit the criteria to avail themselves of the TFC scheme.
f) The free childcare for 3 and 4 year olds, which varies depending upon which part of the UK you are from, could have made some parents less inclined to think about the TFC scheme even though one can claim it on top of those free childcare offerings.
g) Ignorance of the TFC rules was also cited in the radio programme and a throw away comment made by one person was that professional bodies should also be taking a lead in highlighting the obvious benefits of the TFC arrangements in helping reducing the childcare financial burden for those eligible hardworking parents.
Although the Tax and Accountancy profession were not named per se I felt the words of admonition directed at me. To be honest the lady on the radio had a point. Even putting our duty of care to our clients to one side it is surely to our commercial detriment by not advising them about the TFC scheme. Accountancy firms around the country must have a good percentage of their parental client base who would be eligible for setting up a TFC account. I accept for us making those clients aware of it will not be a great money spinner, but surely taking the proactive stance will create a certain amount of bonhomie with them and go a little way in retaining them as clients.
Following the radio programme I felt compelled to remind myself of the basic outline the TFC scheme which I share with you below:
a) The TFC account is for each individual child.
b) For each contribution paid by parents or others into the account the Government will top up it up by a further 25% to a maximum of £2000 per year (£4,000 if the child is disabled).
c) The child must be under the age of 12 (or 16 if with disabilities).
d) Both parents/partners in the household must be working and earning at the equivalent of 16 hours per week at the national living or minimum wage (currently £125.28/week if the parent is over the age of 25).
e) The parent/s need to earn less than a £100,000 a year. This applies to both parents so if one earns a £100K and the other not then the TFC account cannot be accessed.
f) The childcare provider needs to be a registered approved one.
g) If you have signed up to the new TFC scheme you won’t be able to also claim childcare tax credit or Universal credit.
h) You can’t be both in the childcare voucher scheme (CCV) and the TFC scheme. Use something like the ProActivTax childcare resource to see whether or not it is appropriate for the client to jump out of the CCV into the TFC account.
I reiterate my view that there must surely be more than 235,000 children whose parents are eligible for the TFC scheme and would benefit from being in it. Collectively as a profession let’s help bolster that figure as I am sure the goodwill (up to £2,000 per annum per child) that would emanate from the client would be worth it ten times over.
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