Home > Ask Our Experts > Can we Set up a Childcare Voucher Scheme?

Can we Set up a Childcare Voucher Scheme?

By: J.A.J Aaronson - Updated: 2 Sep 2012 | comments*Discuss
 
Childcare Childcare Vouchers Employee

Q.

My husband and I are both the only employees of a close company. My husband is company director and I am company secretary and deal with bookkeeping and other administrative tasks.

I work 2 days a week and we pay for our 3 children to go to registered childcare on those days (this is all paid privatey not through the company).

Do you know if we are allowed to set up a childcare voucher scheme as we are a close company? Would payments for vouchers under the scheme still be allowable for corporation tax?

Are the employees (i.e. my husband and I) still able to get these vouchers tax and NI fee, or does it get considered as a benefit because we are a close company?

(Mrs E.C., 12 November 2008)

A.

The childcare voucher scheme is a very useful, but frequently underused scheme. The government has recognised that the cost of childcare for employees is a significant one. In fact, childcare costs can count among a family's largest regular expenditures. As such, the Childcare Voucher Scheme has been introduced to help ease this financial burden. The scheme allows employees to pay for the cost of childcare from their gross income – that is, from their income before tax. With childcare costs frequently reaching the thousands, this can represent a significant tax saving.

Close Companies

The rules regarding Close Companies are not particularly well explained in HM Revenue and Customs (HMRC) guidance – in fact, there isn't really any guidance on this issue at all. As such, it should be assumed that close companies are treated in the same way as other companies. This assumption has been backed up by numerous accountants; having done some research, I have found various accountants suggesting that they have received verbal confirmation from HMRC that close companies are eligible for the childcare voucher scheme.

Payment in Voucher Form

There are, however, a few factors that you should take into consideration when establishing your childcare voucher scheme. In the first instance, you have mentioned that you are currently paying privately for your childcare. Payments will not be allowable under the favourable tax treatment offered for childcare vouchers if the employee has contracted privately for the childcare and the bill is then settled (in whole or in part) by the employer. As such, you need to make sure that the payment is made in voucher form only; cash payments from the company will be taxed as a Benefit In Kind.

Setting up Your Own Scheme

Alternatively, the company can contract with the childcare provider directly, on your behalf. It is vitally important that the vouchers are viable under HMRC guidance. However, you should remember that this does not necessarily entail paying for the services of a voucher provider. It is perfectly possible for an employer to establish their own voucher scheme, rather than outsourcing. Indeed, for a small company, this may represent a cost saving in the long term, even though it can be fairly arduous to set up in the beginning.

At all stages of the process, it is vital that you stick to the general guidance offered by HMRC, a summary of which is available on this site. Furthermore, it is important that you consider the effects that a voucher scheme may have on your personal tax credits.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • Midaila
    Re: How Will My Second Job Be Taxed?
    Hi if I work from to different agency one job is about 12 hrs and 2nd job 16hrs per week and pay rate is £7.8 an hr.how much…
    22 May 2019
  • Katie Harding
    Re: How Will My Second Job Be Taxed?
    Hi if I earn £153 a week from 1 job and £76 from a second job what tax will I pay? Thanks
    19 May 2019
  • Sue
    Re: How Will My Second Job Be Taxed?
    Hi I’m presently working as a agency nurse but work can be unpredictable so I am thinking of taking on a second job Will I…
    17 May 2019
  • aasma
    Re: How Will My Second Job Be Taxed?
    I have got 2 jobs one job is about 22 hrs and 2nd job 18hrs per week and pay rate is £10 an hr.how much tax I have to pay.
    17 May 2019
  • coolchan
    Re: How Will My Second Job Be Taxed?
    Hi, if both my jobs are under the pa threshold do I still have to pay 20% tax on one of them?
    16 May 2019
  • Mrs Stanton
    Re: How Will My Second Job Be Taxed?
    I work 12.5 hrs a week as cleaner at 8.21hr and been offered a different job doing just 3 hrs a week at 8.21 he will s second…
    16 May 2019
  • lel
    Re: What Does Road Tax Pay For?
    Can I challenge my road tax bill ... the roads in Cornwall are very badly mentained ... they are worn out ... patched up badly ...…
    13 May 2019
  • MAX
    Re: How Will My Second Job Be Taxed?
    Hi I currently earn £25000 a year in full time employed . I have been asked to deliver leaflets which will pay £45 a week…
    6 May 2019
  • Craig6623
    Re: How Will My Second Job Be Taxed?
    Hi, I am currently employed full time and I am earning a base salary of 16000 however I am due to leave at the end of next…
    30 April 2019
  • Yorkie
    Re: How Will My Second Job Be Taxed?
    Hi, I'm in full time employment and in my employers service dept. I earn a decent wage, on the edge if being a higher rate…
    9 April 2019