Family Law expert Claire Edgar explains how childcare vouchers work, the benefits, and recent changes to receiving childcare vouchers while on maternity leave...
Returning to work after maternity leave can be a time of many emotions for us mums –leaving your child for the first time to return to a job that seems like a distant memory can be extremely daunting and scary for some. Many would be forgiven for wanting to stay at home with our little cherubs forever though unfortunately the bills don’t pay themselves!
And speaking of bills – returning to work as a new mum adds another significant cost to the list – the cost of childcare.
The average cost of full-time childcare for one child in Northern Ireland is £162 per week, according to research reported by the BBC in January last year. A figure, by anyone’s standards, which places a significant financial burden on any parent.
This burden can be lessened if your employer offers you the option of Childcare Vouchers. These vouchers are available to all working parents, so long as your employer offers the scheme.
How do Childcare Vouchers work?
The scheme works by way of a “salary sacrifice” arrangement, which means that you give up part of your salary to pay for childcare vouchers up to a specified maximum amount. Getting childcare vouchers basically means that your salary would be reduced in exchange for the vouchers which could then be used to pay for childcare.
Who accepts Childcare Vouchers?
Vouchers are accepted by registered childminders and day nurseries.
What are the advantages/disadvantages of using Childcare Vouchers?
The primary benefit is of childcare vouchers is that you don’t have to pay tax or National Insurance on them whereas you do have to on your salary. This means that your take home pay each month would be higher as you pay less tax and National Insurance. However, receiving childcare vouchers may affect the amount of tax credits you are able to claim. Therefore, it is a good idea to check whether claiming vouchers is beneficial for your own personal circumstances.
How long can I claim Childcare Vouchers for?
Childcare vouchers can be paid until a child reaches 15 or 16 years old depending on their circumstances.
Are Childcare Vouchers available to everyone?
Not necessarily – an employer is not obliged by law to provide a childcare voucher scheme in their business. If your employer does provide the scheme, there is a useful calculator available online that can assist in helping you decide whether to accept the offer of childcare vouchers. It’s available at gov.uk/childcare-vouchers-better-off-calculator
I am currently on maternity leave from work – can I still get Childcare Vouchers to cover childcare for my other children?
For many parents, the need for childcare does not change just because they are on maternity leave. Arguably they now have to balance all the demands that a new baby brings, together with the needs of other children who may be of school going age. For some people, childcare may be needed more than ever. Initially when the first Employer guidance about Childcare Vouchers was produced by the HMRC in 2013, it stated that the vouchers must continue to be provided while an employee is absent from work on maternity leave. This applied even if the employee was on no pay or Statutory Maternity Pay. However, updated Guidance was produced this autumn in September which removes that provision. It seems that this change came about following a decision of the Employment Appeal Tribunal in England in the case of Peninsula Business Services v Donaldson. In this case, the Tribunal ruled that childcare vouchers should be classified as remuneration. This means that an employer would not be required to continue to provide the benefit of childcare vouchers to employees on maternity leave.
So is this change fair, especially as childcare vouchers were introduced in order to give favourable tax treatment to parents and to enable more women with young children to remain in or return to the workplace? Well, it is argued that if an employee goes on maternity leave and her employer is required to continue to provide vouchers during her maternity leave this would produce a windfall benefit for the parent and impose an unfair cost upon the employer. There is no doubt that many parents will have a differing view to that of the Court on whether women should have the right to continue to claim childcare vouchers during their maternity leave.
What will happen to the Childcare Voucher Scheme in the future?
Crucially from April 2018 parents will no longer be able to join or rejoin the current childcare voucher scheme, however it will continue to run as normal for parents who join before the cut-off.
What about parents who haven’t joined the scheme?
There is a new scheme being rolled out in early 2017, known as Tax-Free Childcare (TFC). It will be a staged rollout starting with the youngest children and disabled children first. The government plans to make TFC available to all qualifying families with children under 12 by the end of 2017.
What’s the difference between the schemes?
The new scheme TFC will allow some working parents (where both parents are working or are single parents) to claim up to £2,000 per child towards the cost of childcare per child per year. It has been proposed that for every £8 a parent pays in, the government will pay in an extra £2. This is equivalent to the basic rate of tax. To qualify, parents will have to be in work, and each expecting to earn at least £115 a week and there is a maximum limit as those earning over £100k per year do not qualify.
Parents will be able to use the vouchers with any regulated childcare provider in Northern Ireland, just as they can with the current Childcare Vouchers and providers are currently being asked to sign up to the new agreement.
The biggest difference is that Tax-Free Childcare doesn’t rely on employers offering the scheme, unlike the current scheme. Any working family can use Tax-Free Childcare, provided they meet the eligibility requirements.
Which scheme is for me?
This will depend on individual circumstances but it should be borne in mind that the childcare voucher scheme will be phased out in 2018.
If you have any queries regarding employment rights when on maternity, paternity and adoption you can contact Claire at Francis Hanna Solicitors on Tel: 028 9024 3901 or email firstname.lastname@example.org