Tax-Free Childcare: Nannies

[nannynick]

Info on the proposed tax-free childcare scheme is lacking what happens in the following situation:

Family with several children, one or more of whom are not eligible (so children currently aged 9+ as when system starts they are likely to be past the Sept following their 11th Birthday).
Family has a nanny so childcare cost is not based on a per child figure.

For TFC scheme there needs to be a figure for cost per child - how would you calculate it?
Divide total cost by number of children?
Calculate childcare hours for each child and divide annual salary by number of hours, then calculate the cost of the childcare for the eligible children?
Some other method?

Tbh I assume you will be able to use the TFC allowance for each child, so 3 eligible children gives £6,000 towards a £30,000 bill. The ineligible child just doesn't get any help.

They do know that nannies are a per family cost rather than per child but that scenario is probably relatively rare, and the families who may need the flexibility of a nanny at that stage either have young children who would have a nanny anyway or are in jobs which demand long absences and are probably paid accordingly, knocking them out of the scheme.

You can't legislate for everything.

As I understand it there doesn't necessarily need to be a per child cost. Nannies are being tied into PAYE from the looks of the things (see announcements re checking that pay tallies up with declarations) so as long as the family can show they're using registered childcare and are using the vouchers to pay towards that childcare it doesn't matter what it costs 'on top'.

In 5.55 of the consultation response it says that penalties may be imposed on parents who make false declarations, anauthorised payments, "for example to pay for a non-qualifying child's childcare costs."

So a family with say 3 children, 2 of whom qualify and one which does not, could not pay their nanny 20,000 to care for all the children and claim 4,000 TFC (2000 per qualifying child) as part of that 20,000 cost is for care of a non-qualifying child.

I can see they want to keep the system as easy as possible and it is not yet been through legal process so can change but does there need to be something to guide parents so that they don't defraud the system?

I guess nannies will have to be the exception to that rule. A lot of TFC is based on the assumption that 1 child has 1 space which is 1 invoice. In the case of nannies the qualifying children are benefitting whether the older child(ren) are there or not. It isn't a cost incurred solely for the older child.

It's worse than that Nick, when the system starts it will only be available for children up to five years old. This limit will be increased each year so that children born before September 2010 will never be eligible.

So while it may be clear that if a nanny is employed to look after a 5 year old and a 12 year old then the care that is provided to the 12 year old is incidental and if the cost of that care was to be apportioned then the lions share would go to the 5 year old, however if the children are 5 and 6 you could not apply the same argument.

BUT

Who says there needs to be a cost per child? The requirement to use vouchers, WTC or UC only to pay for qualifying child care exists in the current systems, and nowhere in there does it say that costs must be apportioned. Such a rule would be unworkable.

Does there need to be a cost per child? That is what I am wondering as unlike childcare vouchers the new scheme looks to have an account per child, which are then linked to make it easier for parents to administer online. Whereas childcare vouchers is per employer, one voucher can be used for all children in the family.

Timescale was revised, still phased in but more quickly, phased over first year. Though exact phase in not detailed yet.

I think the revision meant every child under 11 was eligible as of Sept 2015?

I really don't think there does need to be cost per child. I think what they want to avoid is parents having children A, B and C with a CM - A is there FT, B before and after school and C only in the holidays as they're at secondary - and A's childcare costing £10k so they get £2k toward it and B's and C's together costing £10k which is paid via B's account despite a separate invoice to get the credit. This can really only be verified by checking invoices or the provider ratting them out of course, but that just doesn't happen with a nanny anyway because they're there FT for the youngest child and would be paid the same. It's to avoid cross-payment in response to invoices, or worse using child B's account to pay child C's holiday club.

unlike childcare vouchers the new scheme looks to have an account per child, which are then linked to make it easier for parents to administer online. Whereas childcare vouchers is per employer, one voucher can be used for all children in the family.

No, it can only be used for eligible children, although I take your point that in the proposed system there is a clearer link.

But that still does not mean that a direct cost for a particular child has to be invented where none exists - this is simply not possible, and I don't see that anyone is suggesting that it needs to be done. Where a payment is made to a nanny for duties that include eligible childcare and no part of that payment can be specifically determined to be NOT for duties that include eligible childcare, then the existing regulations do not have a problem with this and I don't see how the new regulations can either.

on the age eligibility - I forgot about the 18 May announcement, the draft guidance has not been updated to reflect that yet.

This can really only be verified by checking invoices or the provider ratting them out of course

No, the new system (like the existing voucher system, although not WTC/UC) requires the childcare provider to confirm that the payments are made for eligible childcare when drawing down the voucher payment.

(all this is subject to change of course)

Where a payment is made to a nanny for duties that include eligible childcare and no part of that payment can be specifically determined to be NOT for duties that include eligible childcare, then the existing regulations do not have a problem with this and I don't see how the new regulations can either.

That sounds good. Hope that when they create the new regulations, that they do not change things such that the parents or the childcarer or both unwittingly commit fraud.

When a nanny cares for 3 children say aged 4, 7 and 12, then the nannies pay is the same regardless of if the 12 year old is around or not. Their pay involves some care of the 12 year old but proportioning a figure to that could be rather complex.

I hope they do not create a system which inadvertently means that parents of older children are put off using a nanny. Before/after school nannies have become more popular over the past few years I feel and that wrap-around care is something that families need, even as children get into their teenage years.

Will be interesting to read the transcripts of the bill going through the creation process.