Earlier this month the ECJ ruled that employers should pay VAT on retail vouchers handed out to staff as part of their salary sacrifice scheme. This landmark ruling has caused a bit of a stir in the employee benefits industry, with speculation that other salary sacrifice schemes could be open to review. One of the first things to be called in to question has been Childcare Vouchers, and I’ve seen a couple of articles suggesting that HMRC will investigate whether this rule should be applied to them or not.
I wanted to reassure all our customers and parents that HMRC do not intend to apply this rule to Childcare Vouchers, and we have had the following confirmation from them, “businesses supplying Childcare Vouchers to its employees in similar circumstances to the provision of retail vouchers…will not have to account for VAT on the value of the Childcare Vouchers. This is because the supply of childcare is exempt from VAT.”
They have also confirmed that they are, “...considering whether this will have an effect on the amount of VAT that the business can recover in respect of fees charged by Childcare Voucher Providers. Pending HMRC’s review of the case, businesses that provide their staff with Childcare Vouchers may continue to recover this VAT.”
We are in regular contact with HMRC and as soon as we receive an update on this, we’ll make sure you’re the first to know.