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Salary sacrifice.....all a sham? Please help!(17 Posts)
Having been back at work for almost 6 wks we (myself and employer) are regrettably no further with setting up the above tax benefit scheme. ie employer pays nursery and deducts from your salary, and employee benefits from tax break. On the one hand I am positively encouraged by the nursery who push TEDS as a company to facilitate this set-up (effectively the employer sub-contracts the "management" of the nursery to such companies thus satisfying criteria for eligibility...and here lies the rub i feel), on the other is the local tax office, who seemingly won't advocate a scheme that doesnt bring in tax revenue for them. There are apparently 12 children alone at my nursery benefitting. This is little proof alone for my employer that the system works, already imagining the tax bill and fine down the line if our company's tax is controlled. Company contacts with Human Ressource personnel given to us by the nursery and TEDS have not helped as these companies don't seem to have checked it out.....they are literally "winging it" and it works...but who knows if they will be "caught", "fined" or simply left to carry on. IN the meantime their employees benefit from as much as £400 saving per month....and I do not.
Can anyone advise how to convince my belts and braces employer? Has anyone been in this very situation?
I have already had useful feedback (thanks GIll w) and this isnt a new issue, but I cant understand how TEDS can carry on if they are a scam, nor how our nursery positively advocates this scheme. As background, the loophole was set up to benefit small companies, but they are supposed to be involved in the management of the nursery, which is where TEDS come in......
Please help, our nursery calculations were done on the basis of the -£400 per month....I am really wondering if it is worth me working at all.
THank you in advance
No idea, Stardust; my employer does something similar but ONLY with the on-site nursery which is IMPOSSIBLE to get into with anything less than 1 year's notice. Can't tell you how peeved it makes me feel.
Oh, and just to elaborate -- you can't get a baby's name down at the employer's nursery until baby is born, so obviously they don't want me going back to work until baby is at least 1yo!
Maybe you should try this scheme too (although only for small companies ...>2000 employees)
I'd do some lobbying, its seems a no win.
Is TEDS you're citing one of these companies that takes your salary pre-NI+tax deductions and uses it to pay the nursery fees? Anyway, my employer pays nursery fees pre NI/tax to the on-site nursery. To be honest, I definitely prefer the child-minder environment, and I have heard that it may be made possible in the future to pay CMs pre tax/NI, too. I have tried to campaign, but (for various reasons) let it go, again. We just moved house & are rejigging childcare, so may have the motivation to bring it up again.
Teds take 2 payments from the employer (total approx. £1100) which is in fact their fee for "managing the nursery". THis is the equivilant of NI savings for the employer on the new reduced salary. The employer pays the nursery directly.
I have heard that the saving to the employee constitutes benefits in kind so is still taxable when filled in on the p11d ....and the plot thickens.
My employer is trying his best to seek further info, and to set it up, but we are a very "cautious" "look before you leap" company.
we are on the same wave length but the fact that you have been trying for the last 2 years doesnt fill me with confidence for a rapid turnaround on this. Like you, my employer wants proof that he will not be hit with a huge fine as he is reponsible and not the employee (though i hadnt heard of the problem when you revert back to former salary). Are you in touch with TEDS, or another? TEDS and the nursery gave us contact names, but both admitted never to having run it past the local tax office which my employer insists on doing. THe reply was "we couldnt possibly advocate this system"...but I doubt they can refuse if you send the completed forms in. My employer had other issues. What happens if the employee goes on SMP again...or leaves the company? Inthe event he was going to get legal advice for all contractual changes.....
I am still hopeful, so I will keep you posted...
I keep coming back to the fact that there are 12 kids at the nursery whose parents are paying £400 less....and that we chose this very nursery because they run the scheme.
Let me know about TEDS
Best of luck
Well, I don't know an awful lot about this, but my employer has just started offering Nursery Vouchers on a Salary Sacrifice basis. At present, you only get NI relief as you correctly said, the Childcare Vouchers must be declared on P11d and are therefore taxable.
There are strict regulations as to whether the Inland Revenue will accept an Employer's Scheme and you won't find out until after the Scheme is already in place. I don't know the exact details here, but my HR and Payroll Team advised me not to touch the Scheme with a bargepole.
Also, Salary Sacrifice means just that - ie your basic salary as quoted on Mortgage References, for example, will be reduced by the amount of your Childcare voucher. You also need to take into account that if you are considering taking Maternity Leave again in the future, your maternity pay will also be reduced (and in some cases, you may no longer qualify for any).
From April 2005 the Government have announced that the first £50 per week of Salary Sacrifice will be non-taxable (ie not declared on P11d)
Thanks "cas", this does help
Just to clarify, according to my employer, the TEDS scheme, if passed, would be a non-taxable benefit so wouldn't have to appear on the p11d. THough we still have to get it passed ....
The more feedback I have, I am more inclined NOT to touch it with the proverbial bargepole, but how on earth are other people getting it through and benefitting?
Thanks for the additional info, and certainly interesting as regards the mat leave.
Mumsnet "talkers" will be the first to know if it finally works!
Pamina, sounds more positive!
What about the fact that you have to pay back all benefits once you no longer require the salary sacrifice system? BT and co. must have found a way around this?
Sorry cant help you with the TEDS yet, but await a reply to a letter we sent over. THe fact they are not more helpful doesnt sway me in the confidence factor.
Keep at it!
As I understand it, until the end of March 2004, childcare vouchers paid through a salary sacrifice scheme via employers were not eligible for National Insurance. The difference now is that the new Childcare Vouchers Scheme is not eligible for income tax and that is where the big savings occur. I still don't know if the new scheme affects end of year tax for employees, maternity benefits or pensions - I would really like to find out as I am hassling our Human Resources dept and the management to offer this scheme as a commitment to equal opportunities! Anyone who has had success or who can offer words of wisdom - please comment x
My employer, the local authority, has just announced the introduction of the salary sacrifice scheme for childcare vouchers. Basically you don't pay NI contributions on the deductions therefore you can save around 11%. The company they have contracted with is called Sodexho Pass. If anyone would like to see the information they have provided contact me via mumsnet and I will email them to you. I'm sure that if a big local authority is getting involved it can't be dodgy....can it? I hope not as I was hoping to join.
HI Debster - it's not dodgy and also saves yr employer on their NI, hence their interest too I'm sure. Be careful when they promise 11% saving - this depends so much on individual salary and therefore usual NIC as well as whether you have a pension. I'd reckon more on 9% saving on yr actual childcare costs (they may cap this) as long as you're earning below the NI upper earnings limit. An example could be childcare cost of £500 per month, consequent cost to you being £455 in salary sacrifice in order to purchase £500 worth of vouchers, ie you save £45 per month, not loads but adds up over the year. You could probably check all this with yr HR department or call the company direct- many seem misinformed about all this though as it's far too complex and you may only truly find out the saving to you when yr payslip arrives!
Meant to say - much less hassle all round if the Inland revenue permit yr employer to do this as PAYE rather than yr end p11d as will have to fill in declaration form (they must get the scheme approved). No tax saving on vouchers as yet, but was consultation paper on it, so gov may do in future, cross fingers.
Tax saving is coming next year (from April 2005), but limited to £50/week per parent. They haven't published the full details yet but it looks as if this could actually be be £50/week per employed person, so it's possible that anyone with generous (working)grandparents who'd like to contribute to childcare costs could take advantage of multiple lots of it at less cost to the grandparents than a straight financial contribution. There's supposed to be a consultation paper coming out about extending this to paying nannies and family members as well as nurseries/registered childminders, but I've just check the Inland Revenue site again and it hasn't appeard yet.
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