Childcare and the tax system - fascinating thread title! - but I'm genuinely interested

It's a necessary expense if you have a child, and no-one else to look after the child. Are the tax-deductable expenses absolute necessary expenses in a way that childcare isn't, ie all people working regardless of circumstance will need incur them?

It's not a rhetorical question - my tax affairs are as simple as they get and I have no idea about all this.

"Rather than the more obvious solution that systems are designed by men for men and childcare is something that (until very recently and usually not even now) isn't "their problem"?!!!"

I totally agree with you SQ that this is why working and looking after children is very poorly catered to.

I also think it's telling that SAHMothering is least encouraged* amoung those with access to the least well paying jobs (and therefore those less likely to upset the status quo in terms of getting into positions of influence and less likely to be building up future pay and pension).

*encouraged seems like the wrong word - society is fairly damming of mothers whatever they do.

cakeretention

"You can't claim for your lunch, for the clothes you wear, or for commuting costs from your home to your place of work."

You can if you're self-employed. At least if you're doing it properly :)

SQ -

Tax relief for childcare sounds like a good idea and simple, whereas WTC is horribly bureaucratic.

The thing is Working Tax Credit is a relatively new system, and its not a continuation of a historic model, it required a whole new bit of bureaucracy to administer (which were designed for a reason) . So if you are proposing to replace the childcare element of WTC with a straight tax relief it is worth looking at the two policies side by side and seeing what the results would be.

Currently people with a low family income get 70p of every £1 they spend on childcare paid by the state, up to a limit. For people on a moderate income this benefit tapers away and high earning families don't get any.

If you replaced this with a straight tax relief:

People who earn less than 6.5K would loose all that benefit and gain nothing because they pay no income tax

Low earning families would loose 70p per £1 of childcare spend up to the limit and gain 20p per £1 altogether.

Higher rate tax payers wouldn't loose anything because they probably were'nt getting any WTC, but would gain 40p for every £1 they spend in childcare. The ones who use the most expensive childcare (e.g. the nanny's salary) would gain the most.

Families with moderate incomes where the high earner earn too much for the lower earner to get WTC for childcare would gain 20p per £1 of childcare spend -- essentially taking the responsibility to contribute towards childcare away from the high earner altogether and offsetting it all against the low earners taxes, with the taxpayer providing a subsidy rather than the high earning partner.

It would transfer money away from poorer families to richer ones, and would further embed the idea that childcare is the responsibility of the mother.

I wonder would it be workable to have tax relief for dependents rather than specifically focusing on childcare?

So if you have primary care of a dependent child (or are the wage earning partner of a couple with a SAHP), or are a carer for an elderly, ill or disabled family member - could we make it so that their tax free allowance could contribute to giving you a greater tax free allowance.

Leaving you more money to pay for whatever services make your life easier as an individual combining paid work with unpaid caring responsibilities. Because for lots of people, that isn't actually childcare but outsourcing of other tasks.

When you claim a % of your mortgage/rent and bills etc... because you work from home as a self employed person, the logic is that your business is paying for the space it uses - your workshop or office, including the electricity, phone etc...- in the same way as if you rented an office/workshop somewhere else you would charge that against your business. It's not a contribution towards running your household.

The MPs expense is different - because they have to be based in two places for work, so they have to run two households which they wouldnt have otherwise. You could put them up in a hotel in London and pay for that on expenses, but instead they paid for their second home.

Regular self employed people can't claim for gardners, cleaners etc.. on the basis that they do jobs that free up time to allow the person to get work done. If you had a cleaner you could charge maybe 1/5 of their time, on the basis that they spend 1/5 cleaning your workspace.

I do think a certain amount of thought goes into tax rules, doesn't mean they are right, but they are not completely arbitrary. The childcare part of WTC is designed to offset part of the costs of childcare just like tax relief would - but tapered so it only goes to lower earning families.

Access to good quality affordable childcare should be given to all parents irrespective of what their parents do for living, not just self-employed.

The test is whether it is wholly exclusively and necessarily an expense for your business -I suspect that taxman would argue that may fail first one if say doing something else not working or could have got non paying care like family member or if kids older sent them to school ( I agree this is weak but trying to think of arguments).

There is a case on clothes where (female) barrister tried to claim for costs of black clothing needed for court. She lost as said that needed clothes for decency and warmth . I suspect a similar spurious argument would be used .

I agree it doesn't make sense.

Cakeretention one of the major differences between between bringing up children and commuting to work is that bringing up children adds to the wealth of the nation. It used to be that children were a net economic good for a family - once they were productive they brought wealth into the family. But with changes to our culture (which include legal changes) they have become an economic good for the country but a drain for the family who brings them up.

The main reason I see for providing tax benefits is to make it easier for women with children to work outside the home, helping them develop their careers, stay financially secure and exercise power in the non-domestic realm the way men do. At the moment our culture seems to be weighted against women doing this. It doesn't have to be about making expenses in general tax deductible. It could just be about making life different for women.

I think the thing is if you start designing a system of tax relief for childcare and you work through all the issues: the how do you divide it between two parents issue, the how do you stop it taking money from the poor and giving it the rich issue, the how do you stop people claiming they are 'paying' their mother/partner etc...issue what you end up with is the WTC system we already have.

I suspect they went through the same thought process.

You can't claim for your lunch, for the clothes you wear, or for commuting costs from your home to your place of work. All of these could be considered "fundamental to working" for most people. If childcare were allowed, why shouldn't these (and other expenses) be allowed too?

"Some gain some, some gain more."

The thing is it's a semi-closed system. We won't all gain, even if there is somewhat greater output because we have women creating wealth there's still going to be net tax that isn't going into the system. That means either we spend less or we take it out somewhere else. That's likely to hurt the lower paid.

I think it would mean fewer professional women would be SAHMs. That might mean more women doing better in the workplace which would be good.

I don't think "The Holy Grail" can be sold on the basis of freeing people up for work. It doesn't make sense to provide free childcare so that people can go out to work in a shop job. It has to be more about providing a high quality foundation for life.

I am prevaricating on even that though. I have been thinking more lately about how government subsidies for childcare (including the holy grail) effectively pressurize people into living life in one particular way. In this case it's a way I like, but I am becoming less comfortable with pushing it on others.