NIM02472 - Class 1: Vouchers - non-cash vouchers – qualifying childcare vouchers from 6th April 2005 – how to calculate the exempt amount – the modified rule for vouchers provided between 6th April 2005 and 5th October 2005

Paragraph 7(1)-(3) of Part 5 of Schedule 3 Social Security (Contributions) Regulations 2001

Regulation 10 Social Security (Contributions) (Amendment No.3) Regulations 2005, as substituted by regulation 4 Social Security (Contributions) (Amendment No.4) Regulations 2005

NIM02461 explains how to calculate the amount of earnings included in a non-cash voucher (the chargeable expense). NIM02471 explains:

• an employee is only entitled to one exempt amount even if qualifying childcare vouchers are provided for more than one child
• the general rule for calculating the amount to be disregarded where the chargeable expense exceeds the exempt amount.

But, by virtue of regulation 10, that general rule is modified for a qualifying childcare voucher provided during the period 6th April 2005 to 5th October 2005.

Regulation 10 caters for employees who, in the first six months of the new disregard, may receive vouchers 'up-front'. It means that an employer:

• will be able to provide vouchers in a lump sum in that six month period: for instance, to cover childcare requirements in the summer ;and
• calculate the exempt amount by reference to 26 qualifying weeks.

Regulation 10 applies only to qualifying childcare vouchers provided in the first six months of the new disregard. After that period, the employee will have had the opportunity to receive and save up vouchers or bank their exempt limit (as provided for in regulation 7(3)).

The exempt amount is calculated by the formula E x QW where:

• E is the total of:

• QW is the number of qualifying weeks:

(a) 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

(b) for which no other qualifying childcare voucher has been provided by the secondary contributor.

But where a qualifying childcare voucher provided during the period 6th April 2005 to 5th October 2005, the value of (a) in QW is to be taken as 26. This is subject to the qualification that the total of the exempt amounts that may be disregarded in calculating the employee’s earnings during the above period cannot exceed £1,300.

For:

• the meaning of “administrative costs” and “secondary contributor”, see NIM02471
• the meaning of “qualifying week”, see NIM02455
• examples showing how to calculate the exempt amount, see NIM02475 (contents).