The future of childcare vouchers

You may have seen in the press and media that Gordon Brown recently expressed his intention to remove the tax and national insurance exemption on "Employer Supported Childcare".

An overview of the proposed changes

The government's "Employer Supported Childcare" program was boosted in 2005 when the tax and NIC treatment of related employee benefits was changed – by increasing the level of the exemptions available to employers and employees (exemptions had applied in a different form since 1989).

Childcare vouchers are part of that "Employer Supported Childcare" when provided as a contractual benefit to a working parent, and when meeting the qualifying terms regarding the parent (employee), child and carer. Gordon Brown’s recent announcement reverses the previous boost and proposes the staged removal of all tax and NIC exemptions related to Employer Supported Childcare.

Childcare vouchers have been a popular contractual benefit since Accor Services introduced the first scheme for employers to the UK in 1989. Hundreds of thousands of working parents make savings on their childcare costs each year and in some cases these savings are the deciding factor in whether it is financially worthwhile for them to go to work. The Government's announcement refers only to the tax and NIC treatment of that contractual benefit - not to the actual vouchers or their ongoing availability to working parents. However there would no longer be a financial advantage to a working parent in receiving that benefit as salary sacrifice, nor to an employer to offer the benefit.

What does this mean moving forward?

The government's announcement refers to two separate changes, at different dates. Please note that the following points are assumptions at this early stage, and that further information can be expected in November 2009 in a planned pre-budget announcement.

1. Employees who began their contractual right to receive childcare vouchers prior to 31st March 2011 will continue to enjoy the exemptions on vouchers provided to them (under the same contract) up to 31st March 2015 - so now is the perfect opportunity to encourage uptake of the scheme to allow as many working parents to benefit as possible.

2. Employers who provide childcare vouchers to an employee under a related contract of employment which was initiated or modified after 31st March 2011, will not be in a position to apply the current tax & NIC exemptions to that childcare vouchers benefit.

3. An employer may introduce a childcare voucher scheme at any point between now and 31st March 2011 and an employee may choose to receive childcare vouchers at any point between now and 31st March 2011 to enjoy the exemptions until 31st March 2015.

On the assumption that this Government announcement will actually take effect (as opposed to being abandoned due to adverse public opinion and/or the forthcoming general election) the first change is 18 months away, and the main change approximately 5 1/2 years away.

Of course much of this is based on the re-election of the Labour party. For your information the Conservatives are keen to support the scheme.

HR Magazine

Daily Mail

The Liberal Democrats are yet to express their intentions with regards to employer supported childcare.

It is important to note that whatever happens, the childcare voucher scheme will remain with no changes at least until 31st March 2011.

What do you need to do now?

For employers, the most important thing to do is to continue to run your scheme as you do today and advise your staff that it is currently "business as usual".

Now more than ever is the time to take the opportunity to encourage additional take up of the scheme so everyone can make the most of the current savings available. We can assist with every aspect of a re-launch and ongoing promotion of your scheme.

If you are a parent who is currently receiving childcare vouchers, you can continue to do so under the current conditions until 31st March 2015.

If you are a parent who is thinking about taking childcare vouchers, or increasing the amount, if you sign up before 31st March 2011, you can continue to enjoy the financial benefits until 31st March 2015 so now is the perfect time to join!

What are we doing at Accor Services?

As you know Accor Services is wholly committed to the provision and management of childcare vouchers. It was us that introduced the service into the UK market and it was us that fought for the tax exemptions that employer supported childcare currently enjoys.

We will relentlessly challenge the Government's proposals using the correct channels and media. We of course welcome the initiative to secure free childcare for 250,000 two year olds, however we firmly believe that there are ways of structuring childcare in the UK so that all families benefit!

Accor Services is currently working with the other leading childcare voucher providers to form an industry coalition to lobby government to challenge these proposals, and to take onboard proposals from organisations passionate about childcare that will better serve families, their children, and employers in the UK. In addition to this we are working to produce an industry code of practice, highlighting the professionalism of our industry not only to our clients but also to government bodies.

As part of the ongoing process we will continue to keep you informed via email and website of developments and our stance. We are confident that with the support of our clients, the whole childcare industry, and parents alike that we can overturn this ill-conceived proposal.

How you can help!

It is all about you! You as our clients and your employees are our biggest sphere of influence. Please support us in our efforts by reviewing and signing the following petition:

http://petitions.number10.gov.uk/keepvouchers/

As well as this action, parents and carers can help us by writing to your local MP and we have provided templates that you may wish to use. Find your local MP link below.

http://findyourmp.parliament.uk/

When writing to any MP the address to use is:

House of Commons, London, SW1A 0AA.

Alternatively most MPs now have email addresses which you can find at the same site.

Template Letter Parent

Template Letter Childcare Provider

Employers may wish to write to:

Rt Hon Lord Mandelson, Secretary of State for Business, Innovation & Skills, 1 Victoria Street, London SW1H 0ET

Template Letter Employer

We would greatly appreciate your help. The more awareness we can raise regarding the issue the better. Where appropriate we would be grateful if you could encourage any networks you may belong to or other businesses that you work with to offer the same support.

Please contact us with your comments at expressopiniononccv@accorservices.co.uk or speak to your account manager. Testimonials from our clients, current beneficiaries of the scheme and their carers to the importance of Childcare Voucher schemes would prove invaluable for us to lobby the government to retain tax exemption on employer supported childcare. If you would be happy to speak to the media about your childcare voucher scheme and your thoughts on the proposal, please specify this in the email.

Following the huge campaign to retain tax exemption on Childcare Vouchers the government has now decided not to proceed with their plans.  
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Following the huge campaign to retain tax exemption on Childcare Vouchers the government has now decided not to proceed with their plans.

More information