Guidance and FAQs on Employer-Supported ChildcareThursday, November 3rd, 2011
In August, we advised that HMRC had issued revised and updated guidance for employees and employers. This was in the circumstances that employer-supported childcare was directly contracted or provided by way of a voucher scheme.
We have been communicating with HMRC regarding the following statement in the employer guidance, page 6, paragraph 3:
‘You must carry out an estimate of the level of the employee’s “relevant earnings amount” (referred to elsewhere in this guidance as the basic earnings assessment). If you do not, your employer-supported childcare scheme will not comply with the statutory conditions summarised at the beginning of this guidance. As a result, none of the employees who are members of the scheme will be entitled to tax relief, and you will be liable to pay employer NICs contributions on the value of the benefit.’
This paragraph intimates that failing to carry out the Basic Earnings Assessment for voucher scheme entrants from 06 April 2011 will mean that the scheme loses all tax relief benefits. The paragraph states that employer NICs would become payable which, in turn, indicates that employee NICs would also be payable.
However, in written advice to The Learn Centre, HMRC have confirmed that this statement in the guidance is incorrect and will be amended in due course. So, failing to carry out the Basic Earnings Assessment for an employee/s will not mean that the whole scheme loses its tax and National Insurance saving benefits.
Remember – to comply with the new rules, the Basic Earnings Assessment must be completed for all new scheme joiners from 06 April 2011. This will assess the employee’s marginal rate of tax and determine the value on which tax relief is to be given. HMRC guidance and FAQs for employees and employers are detailed below, together with the Regulations that detail the relevant and excluded amounts to be used in the Basic Earnings Assessment.