Following the announcement of changes by HMRC to the treatment of childcare vouchers for higher rate taxpayers after 6th April 2011, Redbourne has been keen to clarify the detail surrounding what actions employees need to take to be treated under the pre 5th April 2011 regime where all employees are entitled to £55 per week/£243 per month of tax free vouchers. This reduces to £28 per week for 40% and £22 per week for 50% taxpayers for employees joining a childcare voucher scheme after 6th April 2011.
We have now had direct confirmation from HMRC who have confirmed that employees will be able to be treated under the pre-April 2011 rules if they meet the following criteria:
- They have applied for childcare vouchers (submitted an application form) on or before 5th April 2011 - no payments need to have been made
- They have an eligible child, i.e. have a child aged up to 15 (or 16 if the child has disabilities) and have parental responsibility for the child
Based on the above, the employee will be able to receive up to £55 per week/£243 per month of vouchers irrespective of their rate of tax unless:
- Payments do not start within 12 months
- There is a break in payments of more than 12 months
- The employee changes employer (mergers, acquisitions and TUPE transfers do not count)
The guidance from HMRC is available at http://www.hmrc.gov.uk/thelibrary/esc-qa.htm
This information is based on our understanding of current tax law and HM Revenue & Customs (HMRC) practice.
