Scheme rules
Questions answered on this page:
Is there a maximum amount of childcare vouchers an employee can take?
Can I offer employees more than £55 per week?
What must I demonstrate to HM Revenue & Customs when running a childcare voucher scheme?
What do I need to send to HM Revenue & Customs?
Can anyone apply for childcare vouchers?
Can employees use any type of childcare?
What records do I need to keep?
Is there a maximum amount of childcare vouchers an employee can take?
Employees can take a maximum of £55 per week, or £2,916 per year in childcare vouchers free from tax and National Insurance contributions. Any amount over this attracts Employer NI and tax and National Insurance for employees.
Can I offer employees more than £55 per week?
It is up to you as an employer whether you wish to allow employees to have more than £55 of vouchers per week. Be aware that any vouchers taken over and above the maximum £55 per week will attract Employer NI. Employees will also have to pay tax and NI on the additional amount.
What must I demonstrate to HM Revenue & Customs when running a childcare voucher scheme?
HM Revenue & Customs need to be satisfied that the scheme you are running complies with the rules of salary sacrifice. You must keep records to demonstrate the following:
· The scheme is generally available to all employees: Keep a record of the material used to promote the scheme. See HM Revenue & Customs for more details.
· The child is a qualifying child: Keep a record of the child’s date of birth and a note of the relationship between the employee and child. Please note that our standard Salary Sacrifice Agreement fulfils this function. See HM Revenue & Customs for more details.
· The childcare is registered or approved: Keep a copy of your scheme rules that includes a requirement for employees to notify you of any change in circumstances in relation to the child or childcare; a record of the carer ’s name and registration or approval number; a note of when the carer’s approval is due to expire. See HM Revenue & Customs for more details.
Childcare Choice helps you with these reporting requirements, e.g. employees will not be available on the ordering screen until their carer has provided a copy of their carer certification.
What do I need to send to HM Revenue & Customs?
Although HM Revenue & Customs do not need to be notified of the childcare voucher scheme you have implemented, we recommend that that you inform your local office of the new arrangements. There is a template letter contained on the site which should be personalised to your organisation, printed on company headed paper and sent to your local tax office once you have placed your first order. Prior approval will not be given by HMRC.
Can anyone apply for childcare vouchers?
There are a number of factors which must be adhered to when running a childcare voucher scheme:
· The amount of vouchers which can be taken by employees free from tax and National Insurance contributions is capped at £55 per week, or £2,916 per year. See HM Revenue & Customs for more details.
· You must also always ensure that employees’ net pay (salary after vouchers) does not go below £97 per week or £421 per month. This is to ensure the minimum amount of NI is paid and employees’ state benefits, such as Statutory Sick Pay, are not affected.
· Childcare vouchers can be used to pay for care of a child up to 1st September following the child’s 15th birthday or 1st September following their 16th birthday if the child is disabled. See HM Revenue & Customs.
· The employee paying for the child’s care must be either the parent or step-parent of the child, or the child lives with the employee and they have parental responsibility for that child. See HM Revenue & Customs for more details.
· Childcare vouchers must be used to pay for registered or approved childcare. See HM Revenue & Customs for more details.
Can employees use any type of childcare?
Childcare vouchers must be used to pay for registered or approved childcare. See HM Revenue & Customs for more details.