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Tuesday, 21 October 2014

Parliamentary Review of Tax-free childcare

October 2014: Parliamentary Review of Tax-free childcare

On the 14th October 2014 the CVPA gave evidence to the Parliamentary Committee which is reviewing the Tax-Free Childcare bill.

The CVPA highlighted three main concerns about Tax-Free Childcare:

1.  The removal of employer input.  Childcare Vouchers are a vital part of employers’ family friendly policies.  Over 60% of companies surveyed would like to still be involved or support employees with childcare, even with no NI savings.  Childcare Vouchers play a vital role in helping parents return to work, especially after maternity leave. 

2.  Tax-Free Childcare is a less progressive scheme.  Many parents will be worse off under the new scheme, in particular basic rate tax payers with lower childcare costs.

3.  Details of how the new scheme will operate.  The complexity with quarterly eligibility checks and ring-fenced funds for each child is a cause for concern.

The CVPA have also expressed concerns on the appointment of NS&I.  Although a well-respected organisation, NS&I do not have experience of administering timely payments to childcare providers.  The lack of a structured tender process when appointing NS&I leads the CVPA to believe NS&I may not be the best value solution.

The Committee have also heard evidence from other stakeholders including childcare professional associations, NS&I, children’s charities, Mumsnet, Citizens Advice, payroll and personnel professional organisations, London School of Economics and Political Science and HMRC. 


The Committee must complete consideration of the bill by 5pm on Tuesday 28th October.

Friday, 3 October 2014

New Tax-Free Childcare – the real savings behind the headlines

New Tax-Free Childcare – the real savings behind the headlines



Since the Government’s announcement for a new Tax-Free Childcare scheme to be introduced in Autumn 2015, savings figures have been quoted that would impress any parent paying for childcare.  The Tax-Free Childcare scheme is set to replace the current employer supported childcare voucher scheme, and whilst some parents will be better off under the new scheme, the full story behind the headlines paints a slightly different picture. 
    
Wider Plan Ltd, the founders of KiddiVouchers childcare vouchers, has been conducting research comparing the savings made by existing KiddiVouchers scheme members with those which could be made under the new Tax-Free Childcare scheme.  KiddiVouchers scheme members were invited to use the online Tax-Free Childcare savings calculator at www.kiddivouchers.com, with Wider Plan making a donation to Action for Children for each calculation made.

The results of the research were eye-opening: 60% of parents were found to be better off remaining in the existing childcare voucher scheme, and on average would save £400 more with childcare vouchers than with Tax-Free Childcare.  These figures highlight that it is important, now more than ever, for employers to make childcare vouchers available to parents to help them make the highest possible savings.  The good news for parents is that if they are in a childcare voucher scheme before the changes take place in Autumn 2015, they will be given the opportunity to choose which scheme provides the most value for them.  After the Autumn 2015 deadline however, the existing childcare voucher scheme will be closed to new joiners, so now is the time to act.    


Following the overwhelming response from parents, Wider Plan will be making a donation of £3,000 to Action for Children in support of their work to help the most vulnerable and neglected children and young people.  Alison Chalmers, director of Wider Plan said ‘Childcare costs can be a significant strain on parents’ salaries, so it’s really important that parents make the most of the saving opportunities available.  We are delighted with how many parents are using our Tax-Free Childcare savings calculator to work out which scheme will be best for them, and really pleased to be able to show our support for Action for Children’s great work at the same time.’ 

Thursday, 12 June 2014

Consultation reopened on the launch of Tax-Free Childcare

June 2014: Tax-Free Childcare Update
Last week the Queen announced the laws the Government hope to pass before May 2015. This included the new Tax-Free Childcare scheme.
On the 28th May the Government initiated further consultation on the launch of Tax-Free childcare. The consultation will remain open until the 27th June. Building on the previous consultation, the Government is now reviewing the options to deliver Tax-Free Childcare via the public sector, through National Savings and Investments (NS&I), using its existing banking infrastructure and service capabilities, or within HMRC.
The options to deliver the accounts via the public sector will be assessed using the same criteria applied to the private sector: simplicity, efficiency, competitiveness, security and responsiveness.
The aim of the consultation is to consider the pros and cons of administering the scheme via the public sector, compared to a private sector solution. It’s been suggested that the existing online portal, GOV.UK, could be developed to enable parents to register, manage accounts, receive the Government’s 20% top up and direct payments to qualifying childcare providers within the online service.  Currently NS&I has an ‘account’ type service, however HMRC does not and would need to implement one if the decision is for HMRC to administer the new scheme in-house.  
The Government would appear to welcome employers having a voluntary role in helping parents to access the new scheme.  Under the current childcare scheme, employers can offer childcare vouchers as an employee benefit and promote themselves as being a ‘family friendly’ employer.  With the new Tax-Free Childcare scheme, employers not only lose the National Insurance savings they made under the current childcare voucher scheme, they also lose the softer benefit of offering an extremely popular employee benefit.
A private sector solution, delivered for example through existing benefits providers, would give employers greater scope for being involved in the new scheme.  While employer involvement in administration is expected to be non-existent or minimal, employers could be able to enjoy softer benefits, such as employee engagement and retention, by promoting the scheme alongside any other family-friendly services.  Employers often find it valuable to be aware of employees who have family responsibilities in order to enable planning and targeted support.  This information flow would only be available via a private sector solution.
One of the options being considered is an open-market model, with appropriate regulation in place.  Under this model, benefit providers and other private sector firms would compete to offer Tax-Free Childcare to parents.  There is scope under this model for employers to be incentivised by providers to promote a particular brand to employees, on a voluntary basis.  This may help employers balance the books as the loss of their current National Insurance savings leaves a hole in benefits budgets.     
As an employer it is important that you are heard.  By re-opening the consultation, employers now have until the 27th June to have your say. 

KiddiVouchers continues to support clients through the changes and is actively encouraging employers to offer the current childcare voucher scheme, to enable their employees to be in a position of choice in 2015.