Employer Provided Childcare - Technical Guidance Issued by HMRC

February 25th 2010

HMRC has issued a technical note in respect of employer-provided childcare arrangements for new participants from April 2011 onwards.

This follows the recent announcement that tax relief is to be restricted to the basic rate from April 2011 to those participating in qualifying childcare voucher and employer-contracted childcare arrangements for the first time.  This does not affect the exemption regarding workplace nurseries.

The technical note gives guidance on the practicalities of what employers will be required to do to ensure that relief is only at the basic rate.  It will involve estimating an employee’s basic pay and benefits in kind for the year and then calculating the amount of tax free vouchers they can receive according to their marginal tax rate. Therefore, a basic rate tax payer will still be able to receive £55 per week tax-free, whilst a higher rate tax payer will only be able to receive £28 and an additional rate payer (the 50% band) will receive £22.

Full details are available via the attached link http://www.hmrc.gov.uk/employers/employersupportedchildcare.pdf

If you are likely to be affected by this and have any queries please contact John Harling on 07768 446381 or 0115 983 5580 or email jharling@edftax.co.uk