NIM02471 - Class 1: Vouchers - non-cash vouchers – qualifying childcare vouchers from 6th April 2005 – how to calculate the exempt amount – the general rule
Paragraph 7(1)-(4) of Part 5 of Schedule 3 Social Security (Contributions) Regulations 2001
NIM02461 explains how to calculate the amount of earnings
– the chargeable expense - included in a non-cash voucher.
Where the chargeable expense exceeds the exempt amount, only that
latter amount may be disregarded in the calculation of an
employee’s earnings.
Regulation 7 provides more flexibility to allow, effectively,
employees to 'bank' qualifying weeks. The formula for calculating
the exempt amount enables the operation of the disregard to include
previous qualifying weeks in the tax year where:
- the employee is employed by the employer providing the vouchers; and
- that employee has not received qualifying vouchers previously.
This means that an employee who has qualifying weeks does not
have to actually take the vouchers in each qualifying week and save
them up, but can take them at a later date, for instance, in the
summer or at Christmas, when they may need the financial help with
childcare costs more than at other times.
An employee is only entitled to one exempt amount. This is so
even if qualifying childcare vouchers are provided for more than
one child.
Calculating the exempt amount
The exempt amount is calculated by the formula E x QW
where:
- E is the total of:
- £50 (£55 from 6th April 2006); plus
- the administration costs for the voucher
- QW is the number of qualifying weeks:
- for which the employee has been employed by the secondary contributor during the tax year in which in which the qualifying childcare voucher is provided; and
- for which no other qualifying childcare voucher has been provided by the secondary contributor.
Meaning of “administration costs”
The administration costs for a voucher means the difference
between:
- the cost of providing the voucher; and
- its face value ie, the amount stated on, or recorded in, it as the value of the provision of childcare that may be obtained by using it.
“Secondary contributor”
Where:
- an employee has two or more employments; and
- the earnings from which fall to be aggregated under either regulation 14 or 15 of the above Regulations,
the reference to “secondary contributor” in (b) of
the definition of QW above is a reference to the “secondary
contributor” in respect of any of those employments.
For:
- the meaning of “qualifying week”, see NIM02455
- details of how to calculate the exempt amount in respect of a qualifying childcare voucher provided during the period 6th April 2005 to 5th October 2005, see NIM02472
- examples showing how to calculate the exempt amount for the 2005/06 tax year, see NIM02475 (contents)
- details of the monthly exempt amount from 6th April 2006 onwards, see NIM02473.
