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Who is likely to be affected?
- Employees who receive the benefit of employer-contracted childcare
or childcare vouchers. Employers who provide childcare benefits.
General description of the measure
- Employees will be able to receive up to £50 a week of childcare
tax and National Insurance free where their employers contract with
an approved childcarer or provide childcare vouchers for the purpose
of
paying an approved childcarer.
Operative date
- 6 April 2005
Current law and proposed revisions
- Currently where an employee receives the provision of childcare
or childcare vouchers as a benefit-in-kind a tax charge arises on the
benefit,
except in limited circumstances where the employer provides a nursery
or crèche on the employer’s premises, or one that is
wholly or partially managed and financed by the employer. No employers’ Class
1A National Insurance charge currently arises on the provision of
childcare and childcare vouchers are currently exempt from Class
1 National Insurance.
- The Government announced in the Pre-Budget Report in December
2003 that from April 2005 a new tax exemption will apply to employer-contracted
childcare and childcare vouchers. The tax exemption will be limited
to
the first £50 a week of contracted childcare or vouchers and
the National Insurance exemption will be aligned with this. The main
conditions
for the exemption will be:
- that the childcare benefit is made available to all employees where
a scheme operates; and
- the childcare is registered childcare or approved home-childcare.
Further advice
- If you have any questions about this change, please contact your
local tax office. Please see the Childcare pages
for further information about this measure.
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