Childcare Vouchers – Phased withdrawal of tax exemption from 2011Thursday, October 8th, 2009
At the Labour Conference, the Prime Minister, Gordon Brown, announced:
“And for all those mums and dads who struggle to juggle work and home, I am proud to announce today that by reforming tax relief we will by the end of the next Parliament be able to give the parents of a quarter of a million two year olds free childcare for the first time.”
The HMRC press office subsequently provided the following statement:
“The PM has announced an extension to the Government’s provision of free nursery places for two year olds so that 250,000 children will benefit by 2015/16.
This extension will be funded by the phased withdrawal of the tax and NICs exemptions for childcare vouchers provided by an employer. From April 2011, employees who join an employer-supported voucher scheme will not be entitled to the existing exemptions. Existing recipients of vouchers will be unaffected until April 2015, when the exemptions for vouchers will be withdrawn completely. These changes affect childcare vouchers only – the long-standing exemptions for workplace nurseries will remain unchanged.
More details will be set out at Pre-Budget Report.”
As the childcare vouchers exemptions for both tax and NICs are the basis for the most popular salary sacrifice schemes currently in place, the withdrawal of the exemptions is expected to have serious repercussions for employers and their employees who rely heavily on the savings provided by these schemes. The providers of commercial childcare vouchers have already organised a “save the vouchers” campaign and an online petition.
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