Childcare Approval Scheme

As of April 2005 a government scheme was introduced which enabled parents to get some financial support to help pay for their employment costs, when employing an approved nanny.

Employer Supported Childcare Voucher.
Under the childcare approval scheme (April 2006) families may receive financial support by using employer-supported childcare vouchers, which will exempt parents from paying Tax & NIC on the first £55 per week or £243 per month of their childcare costs

The Salary Sacrifice

Is where the employee gives up salary in exchange for the employer paying towards a place or a voucher in order to benefit from the exemptions available for employer sponsored child care. The annual savings are quite substantial £962.28 for a 22% tax payer and £1195 for a tax payer on 40% rates. And both parents can use the vouchers as long as they are both in employment.

The Working Tax Credit

Families are eligible for working tax credit support for childcare in their own home. Parents on the lowest incomes will receive the most with support tapering off towards the higher end of the scale. The financial support covers up to 80% of childcare costs.

Employer-supported childcare vouchers are a popular way for parents to make savings on their tax relief as the scheme is available to all regardless of income.

Companies should take legal and /or financial advice before proceeding with salary sacrifice schemes, and individuals considering taking a salary sacrifice need to be aware of the implications for their own pay and benefits and state benefits and credits.

To be able to use childcare vouchers you need to be employed, as self employed persons are not able to benefit from childcare vouchers.

If you are a director of a company you can also use childcare vouchers, as long as you make them available to all your staff as well.

Your employer needs to set up a childcare voucher scheme, there are many companies offering this service ( web search voucher companies) depending on service level the costs range from approx 5%-7% of voucher face value. The costs of running the scheme are offset by the savings in employer NIC up to 12.8% and the administration of the scheme can be offset against Corporation Tax.

Your employer will need to know details of your relationship with the child, the child’s date of birth, your nanny/child carer’s registration or approval number and the approval expiry date to make sure you qualify for the Tax & National Insurance exemptions

The vouchers can be used for any registered or approved childcare, for children aged between 0-15 up to 1st September following their 15th birthday (16th if disabled)

Nannywage Ltd does not operate Child care voucher schemes, as the company policy is that, by not being involved, we offer impartial advice to clients.

For further information search, “child care vouchers” on your internet search engine

1. The approvals scheme is entirely voluntary.

2. For parents to benefit from the children scheme, the nanny/carer has to be approved and provide evidence of her approvals certificate to a voucher company.

3. Has a relevant qualification or has attended an approved induction course in childcare.

4. Has a certificate in first aid that is suitable for the care of babies and children and is not more than three years old at the time of approval (e.g. dealing with emergencies, resuscitation, shock, choking and anaphylactic shock)

5. Has nothing in their background that makes them unsuitable to care for children.

6. To qualify the nanny/carer has a Criminal Records Bureau enhanced disclosure check.

7. Is aged eighteen or over.

8. To be registered the nanny will have to pay an annual fee.If the nanny does not already have a CRB enhanced disclosure the cost of this will be included in the registration fee. However if nanny has a CRB disclosure in place there is no reduction in fees.

9. The costs of any qualifications required are not included in the fee.

10. Once a nanny registers with a voucher company, and provides the approval evidence she will be issued with a unique service provider number.

11. The nanny/carer must register a bank account with a voucher provider, and payments are made direct to her bank account.

12. If the nanny/carer is not required to be a registered or approved, there is a voluntary registration process to qualify to accept childcare vouchers

13. Registration to a voucher company in most cases is entirely free of charge.

Useful Information

To check if your nanny/carer’s registration or approval is valid go to:

England - www.ofsted.gov.uk

Wales - www.wales.gov.uk/csiw

Scotland www.carecommission.com

For further information on the rules for tax and National Insurance contributions and the effects of giving up salary for childcare.

Go to www.inlandrevenue.gov.uk/childcare

These notes are for guidance only and reflect the position at the time of writing. They do not affect any right of appeal

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