Pushing to extend childcare vouchers to the self-employed has been on our agenda for several years now and support for the idea is really gaining traction.

CVS – together with the other leading providers Edenred, Sodexo and Grass Roots – has been working for several months to put together a model that is workable, easy to implement and will ensure self-employed parents reap the same benefits as other working parents.

I had the honour of presenting our model to the Conservative Women’s Forum at the House of Commons last Thursday and they’re keen to back the plans.

The model will allow self-employed parents to claim tax and National Insurance back at the end of the financial year – providers will be required to issue them with a certificate, detailing their childcare voucher spend for that year.

It’s piqued George Osbourn’s interest as well and made the pages of the Independent on Sunday this weekend. You can read the full article here, including a quote from me:

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I’m delighted that we’ve put together a strong model which is being supported by such an influential group. Extending childcare vouchers to the self-employed supports the ethos of ‘Start-up Britain’ and will allow self-employed parents to enjoy the same £933 saving per annum as basic rate employees.

Of course, we’re not resting on our laurels now and will continue to support this model and work tirelessly to ensure vouchers for the self-employed become a reality.

Following the well-publicised Astra Zeneca case that went through the European Court of Justice in July 2010, HMRC issued guidance on how VAT should be applied to salary sacrifice schemes.

We covered the ruling and HMRC’s initial guidance in our blog post ‘ECJ Ruling does not apply to childcare vouchers’ on 11 August 2010.

HMRC issued further information in 2011 which expanded on the initial guidance and stated that new VAT treatment must be taken into account from 1^st January 2012 – you can read the full guidance notes here.

No doubt you have sought the proper advice in the run up to this deadline and are clear on your requirements but as there has been considerable commentary on how childcare vouchers are affected by this ruling I wanted to be clear on what the guidance is and who you can contact for help.

Section 4.3 of the HMRC’s guidance relates to childcare vouchers and states that:

“Childcare vouchers are not directly affected by the judgment as they are not subject to VAT.

However, employers that incur administrative fees from their voucher provider have, to date, been permitted to recover VAT on those fees as a general business overhead. However, because the fees are directly attributable to the exempt supply of vouchers the normal partial exemption rules must be applied with the result that the VAT incurred may no longer be fully recoverable.

Affected businesses should apply this treatment from 1 January 2012.”

Source: HMRC Revenue & Customs Brief 28/11

It is worth stressing, as the guidance states, that VAT may not be fully recoverable, suggesting that a portion of it may still be recovered and that this change will not affect all employers offering a scheme. If you’re in any way unsure of how this will affect you then we’d urge you to contact HMRC for clarification.

This ruling does not affect parents; they will continue to receive childcare vouchers as before.

There was some good news for parents in the Chancellor’s autumn statement, with a number of measures being introduced to help the most disadvantaged children.

Chancellor George Osborne announced that the provision of early year’s childcare is to be extended to an extra 130,000 disadvantaged two year olds. This is part of the Government’s targets to tackle the long term causes of child poverty, by enhancing early development for disadvantaged children.

The Government plans to invest a further £380 million a year by 2014-15 to extend its offer of 15 hours of free education and care a week for disadvantaged two year olds – effectively doubling the number of children who will receive free nursery care.

This means that 40% of two year olds – 260,000 children – from the most disadvantaged families will now get support in their early years.

While we welcome these changes and the positive effect they will have for a number of families, we feel there is still more which can be done to support working parents.

For families facing increasing bills, stagnant salaries and rising childcare costs, childcare vouchers continue to play a vital role and we believe the scheme could be adapted to provider even greater support.

Over the coming months we will be looking at other opportunities for the scheme – including ways for vouchers to be made available for the self-employed.

One thing is clear, with childcare costs estimated to increase dramatically over the next few years the savings available through the childcare voucher scheme will prove more important than ever.

Research published today by the Social Market Foundation shows that as a result of growing childcare costs and reduced Government support, working parents are set to pay more from their own pockets to cover childcare costs.

The research is supported by The Childcare Voucher Providers Association (CVPA), of which CVS is a founder member.

Key findings show that:

• Low income families in 2015 are likely to pay £600 per year more for their childcare compared to 2006 – almost 7% of their annual income:
• a middle-income family in 2015 is likely to pay £900 per year more; and
• a higher-income family in 2015 is likely to pay £1,400 per year more.
• If childcare costs continue to rise at the current rate, the cost of a typical amount of childcare will be £104 per week in today’s money; a 13.5% rise from 2006.

Ultimately, this means that if we’re to return to the public support levels offered in 2006, the high point for childcare support, the following measures need to be taken:

• The proportion of childcare costs covered in the new Universal Credit would have to increase to 83% (from the current 70%)
• The childcare voucher entitlement for basic rate tax payers would need to increase to £83 per week – it’s currently £55 per week, which has remained unchanged since 2006.

The report clearly demonstrates the consequences if funding continues to drop whilst costs rise. As part of the CVPA we’re committed to promoting the role childcare vouchers can play in offsetting the costs parents are faced with – it’s not just childcare they have to pay for after all and easing that burden will help elsewhere and hopefully help them return to work.

The report will be formally launched today where the SMF will present their findings to members of parliament and civil servants in order to raise awareness of the issues and highlight potential solutions. 

I’ll be at the event to represent the CVPA and give the introduction to the session. I’m looking forward to being able to talk about the relevance of childcare vouchers in helping parents meet their childcare demands and how we move forward to ensure parents are not simply priced out of childcare.

You can read the SMF’s report ‘The Parent Trap’ here.

With soaring inflation and utility bills you may think Christmas cheer would be the last thing on parents’ minds, but it seems spending on presents for the kids is one thing Mums and Dads are just not willing to compromise on.

We asked over 1000 parents how much they plan to spend on presents for their children this Christmas and found that despite increasing financial pressures, 16% expected to spend over £300 in total on their kids’ presents this year. A further 19% said they’d shell out between £200-£300 and 5% are planning to spend over £500!

Christmas can be tough on the family bank balance, but even when budgets are squeezed parents still want to provide all they can for their children, the important thing is not to be left having to pay the price for Christmases past.

I read a recent survey by HSBC which showed 21% of parents will be borrowing money to pay for presents, while others will be relying on their overdraft, payday loans, personal loans and borrowing from friends and family.

If you’re a parent, then make sure you’re making the most of all financial schemes and benefits you are entitled to, such as childcare vouchers, which can save a huge amount to be able to add to the Christmas present fund. If you’d like more information on childcare vouchers and the savings you can make, visit our website.

Also, consider other ways you can make savings this time of year. We’ve put together some simple ideas of fun ways for families to save some pennies and have a ‘home-made’ Christmas this year.

CVS’ tips for ‘making’ this Christmas the best ever:

Spending less can often mean giving more, especially when it comes to presents for relatives such as grandparents. Here are some ideas for ‘making’ Christmas:

• Get handy – Handmade Christmas cards are fun and easy to make, highly personal and will always be well received. One idea to try with the children is to create a design using an upside down hand print to become Santa’s face and beard. Stick on eyes and add rosy cheeks to bring extra charm to the design.

• Get cooking – Stained glass window biscuits make a beautiful and edible Christmas tree decoration. Use seasonal biscuit cutters to create trees, stars, bells and present shaped biscuits then cut out an identical shape in the centre of each biscuit and pop in a boiled sweet before putting in the oven. Remember to make a small hole at the top of each biscuit so you can thread ribbon through for hanging, then bake and decorate with icing.

• Get foraging – Pinecones can make a festive and charming decoration. They are versatile and can be painted and hung on the tree or around the home. Place in silver bowls/cups/candlesticks and top with glitter covered cardboard stars as tabletops; or even use them to decorate the cheese board and fruit bowl.

• Get snappy – Collect together photographs from Christmases past and from members of the family. See how far back you can go by involving grandparents, and see what precious stories and anecdotes can be uncovered along the way. Copy the images and use them to make unique place settings or gift tags.