Employees are now entitled to receive up to £55 per week tax free
towards childcare costs. This can be a direct payment from the
employer to the nursery or in the form of childcare vouchers given to
the employee. Note that the vouchers must be approved by the
nursery in order to be valid and show the names of both the child and
the parent. Both parents can claim the £55 so for a husband and wife
company this adds up to £5,720 per year. However, you can only claim
for one child each, not for the whole brood (you could be the old
woman who lives in a shoe but you would still only get £55 per week).
Apart from being a useful way of getting money out of the company tax
free, it also qualifies as a trading expense so the company can claim it
against corporation tax. A further advantage with vouchers is that there
is no time limit on them, so you can still use them even when your
children have grown out of childcare for things like horse riding or
ballet lessons, right up to the age of 16. However, the organisers must
have a legal responsibility to look after your child. Also, it mustn’t be for
full time education so activities organised by schools for groups of
students such as holidays or field trips do not count.
Latest news - if you want to take full advantage of childcare vouchers or set up a scheme for your staff, you may need to do so by 31st March 2011.
Gordon Brown has now scrapped his original proposal to remove tax relief on these benefits but will limit it to basic rate only with effect from 1st April 2011, so higher rate taxpayers will not get full tax relief. Apparently this will not apply to existing schemes however, so our advice is to make sure your scheme is in place by that date.
