Government makes moves to tackle childcare costs

Good news for parents - more help could soon be on the way for families to help them manage the spiralling cost of childcare.

Prime Minister David Cameron has recently announced that he intends to set up a new commission that will focus on childcare and work with parents and providers to try and find ways to make childcare more affordable.

As well as looking at ways to reduce the cost of childcare, the commission will look for inspiration from international childcare models and also consider ways to increase places and “wrap-around care” for children over-five, during holidays and out-of-school hours.

The Daycare Trust has revealed in its annual ‘Childcare costs survey 2012’ that working parents are now paying, on average, £15,000 per year for childcare - more than a third of their income - and with little financial help.

According to the Trust, the high cost of childcare is forcing many parents to consider sacrificing work in order to care for their children, whilst living off national benefits.

Here at CVS we think the introduction of the commission is a very positive step by the Government. There is an obvious need to balance the need for quality childcare with affordability and it will be interesting to see what conclusions the commission arrives at.

Times are very tough for many UK families, especially in the current climate and it’s great that the Government is starting to address some of these issues.

We have long been campaigning for addition support to be made available for working parents, such as by increasing the tax-free limits on childcare vouchers in line with increasing childcare costs or by making the vouchers scheme available to the self-employed, so they too can benefit from the savings.

We hope that these measures may now be seriously considered, as they could make a huge difference for so many parents.

If you’re a parent or childcare provider and would like more information about childcare vouchers, then you can find more details on our website or on our interactive Facebook page

Government considers new ways to reduce childcare costs

There's positive news for parents, as it’s revealed that the Government is looking into new ways it can help make childcare more affordable.

Prime Minister David Cameron has given a strong indication that tax breaks may be offered to families who hire nannies or childminders, reportedly saying he is ‘hugely attracted’ to the idea and finds it ‘odd’ that the current tax system doesn’t offer help to mothers who want to return to work.

One initiative thought to be being considered is a ‘maid credit’ scheme, currently used in Finland and Sweden. Under the scheme, domestic helpers such as nannies and babysitters can claim back tax credits before then invoicing the family for the remainder.

It is thought a system like this could help ease some of the financial pressures faced by families by saving them thousands of pounds each year, while also encouraging them to formalise payment arrangements.

While firm plans are yet to be made, overall it’s great to hear that the government is focusing on and considering different ways to make it easier for parents to be able to afford childcare.

Elizabeth Truss MP is backing initiatives to deregulate childminders, as one of the options to decrease childcare costs for working families. She proposes a system whereby local agencies monitor, supervise and inspect childminders and nannies, and it is these agencies which are regulated by Ofsted.

Here at CVS, we strongly back parents and would welcome any additional support being made available when it comes to ever increasing childcare costs. We would, however, add that any new initiative must always be dependent upon there being no reduction in quality or the standards of childcare.

Family focus in the Queen’s Speech

On the 9th May, the Queen delivered her annual speech, setting out the key plans and legislation that the Government will be focusing on over the coming year.

Amongst the plans, which cover everything from crime to employment, pensions and reforms to the House of Lords, there are a number of positive steps being suggested for the benefit of families.

Here is an overview of some of the main issues raised:

Children and Families
• More flexibility could be given to parents in Britain, so they are able to easily share their parental leave following the birth of a child. The suggestion is that mums who want to return to work earlier after having a baby can transfer some of their maternity-leave entitlement over to the father.
• Attempts will be made to speed up the adoption process, including making inter-racial adoption easier.
• In the case of a family breakdown, the law may be changed to ensure more children continue to have a relationship with both parents, as long as it is safe and in the best interests of the child.

Special needs support
• Support for children with special needs looks like being improved, including more choice for families over education for pupils with special educational needs.
• The system of Special Educational Needs (SEN) statements for children with disabilities and learning difficulties is to be replaced in England from 2014 by a simpler assessment process.
• The age that statutory protection will provided for those in full time education seems likely to be raised from the age of 16 to 25.
• Young people could be given the right to a personal budget to spend on support and care.

It’s great the speech has highlighted some positive changes that are to be introduced for the benefit of parents.

At CVS, we strongly back moves to offer further help and support for families. That is why we have been working hard to try and have the childcare vouchers scheme extended to include the self-employed, so more parents may benefit from the savings they offer.

Together with other leading childcare voucher providers we have created a workable model that would be easy to implement and could enable self-employed parents to reap the same benefits as other working parents.

More on this topic as our lobbying progresses.

Employers: Are you up to speed on salary sacrifice VAT changes?

It’s been nearly three months since VAT changes came into force affecting salary sacrifice schemes, so we thought we would put together a little refresher for employers on what the changes mean for childcare vouchers.

The changes

On 1 January 2012, changes to the way VAT is levied on salary sacrifice schemes came into force, bringing with them the potential to increase the overall costs of such schemes.

Salary sacrifice is a way for employees to exchange part of their salary for a non-cash benefit. Traditionally they have been used for pension contributions, but they can now also be used for benefits such as bikes, childcare vouchers, high street shopping vouchers, mobile phones and in certain areas even bus passes. The new rules mean that some of these items will now be liable to VAT.

What's behind the VAT change?

The changes have been made as a result of a European Court of Justice (ECJ) ruling in a case regarding Astra Zeneca and the high-street shopping vouchers it provided to employees under salary sacrifice arrangements. The ECJ ruled that the provision of shopping vouchers to staff as part of a salary sacrifice scheme was a supply of services in return for payment. This meant that Astra Zeneca was able to reclaim the VAT it had paid to acquire the vouchers, but the company also had to pass on to employees the cost of the vouchers including VAT.

So what now?

Following the changes, all salary sacrificed in exchange for benefits that are liable to VAT - including bikes and high-street vouchers - will now be liable to VAT.

What about childcare vouchers?

Computershare Voucher Services Limited (“CVS”) has obtained confirmation from HMRC that childcare vouchers provided by us are “credit vouchers” as defined by Sch 10A VATA 1994, as we never charge more than the face value for the voucher itself, the voucher is outside the scope of VAT.  As HMRC consider that the employer is an intermediary supplier of the voucher to employees, the same VAT liability rules will apply, although each employer should seek their own professional advice on this matter.

HMRC have also confirmed that the CVS service charge for the administration of the scheme is a separate standard rated supply.  As employers do not charge employees more than the face value of the voucher, then (depending on the employer’s circumstances), the VAT that CVS charge for the service charge, should be a deductible expense.  If, however, an employer starts to charge employees more than the face value for the vouchers, this position would change and employers should take their own professional advice.

Parents urged to act to protect their financial savings

Many parents may be unaware they are at risk of losing out on the highest level of childcare voucher savings unless they act now, and here’s why...

Parents currently using childcare vouchers may be aware that last April the Government introduced new legislation lowering the savings limits for new joiners of the scheme.

This legislation had significant financial implications, particularly for those higher rate taxpayers who wished to sign up and make use of the savings.

For parents already on the scheme their level of savings was unaffected, but their existing level was only protected provided that they ordered childcare vouchers at least once in every twelve month period.

So many parents could now be in danger of losing out - unless they act quickly.

And it is not just higher and additional rate taxpayers who stand to lose out – see how this issue could affect you.

Higher or additional rate taxpayer

 If you are a higher or additional rate taxpayer who joined your employer's childcare voucher scheme before 6th April 2011, then while you remain eligible you have a right to a higher level of savings. This means you can receive up to £243 per month in childcare vouchers.

If you have ordered vouchers in the past twelve months, or do so now before the twelve months is up, then you will remain at this level for a further year. This will mean you are still able to make savings of up to £1,224* a year in tax and National Insurance payments if you are a higher rate taxpayer, or £1,516* a year if you are an additional rate taxpayer.

Basic rate taxpayer

For a basic rate taxpayer, you may also want to order childcare vouchers within this 12 month period to retain your protected rights. This means you will be able to receive childcare vouchers up to £243 per month if you ever become a higher rate taxpayer.

If you lose your protected rights then you can continue to receive childcare vouchers up to £243 per month, but ONLY while you remain a basic rate taxpayer. Remember, as a basic rate taxpayer you can still save up to £933 per annum in tax and National Insurance payments.

To order your vouchers, or if you would like any further information on this issue, then the team at CVS would be happy to help you. You can reach them on 0845 002 1111 (8am-8pm, Monday to Friday)