Childcare vouchers - paying for others?

[peradetlic]

Hi,

I'm probably going to move away from UK in a few months and am wondering what to do with the unused childcare vouchers I have. As far as I understand, it's not possible to refund them, but should talk to my employer at some point just in case they allow me to.

My question is - is it possible to pay for someone else's child Basically, then I could sell them for a discounted price to a friend, and would in return use up my vouchers to pay for his kid's childcare. I don't know if this question makes any sense as I have no idea how they work (I've been buying the vouchers but haven't used them at all yet).

Thanks!

wouldn't have thought so as its your tax reduction not your friends and you don't have a contract with their childcare. The vouchers don't expire so save them for your return.

Thanks, yeah that's what I thought, but on the other hand, it seems unfair that I just threw money into something and can't get it back.
You mention contract with childcare - yes but surely e.g. if I wanted to, I could pay for my friend's nursery by making an online payment from my account onto nursery's account, I don't think the nursery would mind. So is it not the same with child vouchers, it's effectively just another form of currency?

I think you can get some refunded

What you propose would amount to selling a tax benefit/rebate to a friend. It would almost certainly be classed as tax fraud and therefore illegal.

Contact the voucher company. It takes time, but I believe they can refund unused vouchers through payroll once the figure has been adjusted for tax/NI. They will be able to advise you.

It's different to another form of currency, as it is a tax relief benefit personal to you. You only have access to it because you are the parent of your child - just as your neighbours can't all claim child benefit for your child.

If you sold them to someone else I believe that would be tax fraud, as you'd have already made the saving on your tax, and you'd then be getting back your cash, so you'd have ended up paying less tax than you should.

I get that it's really annoying to have that money tied up in something you can't use, but it's an optional scheme, so it's not unfair at all, you could have chosen not to buy those vouchers.

I'm guessing the move abroad is unforeseen, as a pp says you can save them for if you return. Otherwise speak to the voucher scheme provider to see if there's any other option, your employer won't be able to help.

If you are leaving the employer's service permanently, your employer must make arrangements to refund unused vouchers if you request it before you leave, under HMRC rules.

Ok for all the reimbursement comments - I didn't think this was possible as I read at many places that the vouchers are non-reimbursable.. but yes of course my first attempt will be the voucher company / my company.

I understand the arguments behind people saying it is tax fraud, however I don't think it is so black and white. It does not seem like the fraud if the system allows you to do it effortlessly (i.e. back to what I was wondering originally - is it actually possible to pay for someone else's kid with the vouchers?), as otherwise the system would surely try to prevent it. E.g. consider child benefit - you get cash for your kid. There is no control what you do with this cash, you can spend it on whatever you want, and it is not fraud, despite it being 'for your kid'. Or cycle-to-work schemes - you can't just take cash but you need to buy a bike with it as otherwise it won't work, i.e. the system prevents misusing that money for something else.

Also, the whole point of the voucher scheme is to help me a bit financially to raise my kid. What's the difference whether I do it by using the vouchers, or I do it by selling vouchers and using the cash to help me raise the kid? (obviously, the cash value will be smaller than the voucher value as otherwise the other person has no incentive to buy it, so it's not like I'm finding a loophole to artificially boost my benefit, I am loosing money)

Yes I know it is on voluntary basis, but that does not make it fair - if I am not able to take my money back (of course adjusting for the tax breaks) then I would say voucher companies are making fools out of us all. Imagine you're paying into your pension for years, decide to move abroad, and you're told that the money is locked and cannot be used unless you come back to live in UK (of course, this is not how pensions work as - it would be crazy!). It's voluntary, I could have chosen not to pay into my pension, but that wouldn't make it right. Also, in many other countries, like France, Germany, Italy, .. you simply get a tax break for having a kid, and you can spend this however you want to, without all this voucher nonsense of locking away your money.

Anyway, sorry for the rant, thanks for all the responses :)

Whilst I understand your reasoning, you’re making the basic mistake of most people who’ve been schooled to trust in the apparent beneficence of so-called 'liberal democracy'. That is, you show every sign of believing rules and laws are intended to be logical, fair and reasonable. They are not. Laws/rules are an extension of the power invested in those who make them, mitigated by the potential power of others to oppose them.

By way of a case in point........There is nothing particularly fair or logical about the fact that it is relatively easy to get financial help with childcare, including free childcare, but extremely difficult to get help with care for an elderly relative, or impossible to get free transport to work.

Tax rules probably make less sense than any other laws. They simply are what they are. Never expect HMRC to operate along the lines of logic or reason, no matter how good or logical your reasoning happens to be.

The quick and dirty answer to your question is to call HMRC and tell them exactly what you’re planning, and see how they react. But be aware at policemen powers are nothing next to what HMRC officers can do.

In any case, the friend who wants to 'buy' the vouchers is likely to be sorely disappointed. Any childcare provider which accepts them is laying themselves open to a fraud investigation, and they’d be incredibly stupid to take such a risk.

Hi OP, I'm in a similar position in that I have an amount sat in childcare vouchers and I no longer need childcare as I'm at home.

I contacted the voucher company who advised me to try getting a refund through my employer although there is no obligation to refund. The company advised they just hold the money and are unable to deal with any refunds as it must go through a payroll system so the money can be taxed.

Employer refused a refund. For reasons stated above I cannot pay for someone else's child and reclaim the money that way.

Every single club my kids have shown an interest in do not accept childcare vouchers. I'm now looking at either paying out for childcare which is completely unnecessary or waving goodbye to the money.

I accept that it is partly my fault for not planning properly but I also feel there was not enough information/advice from either my employer or the voucher company that I may lose money or how to ensure I'm refunded.

I contacted three voucher companies this morning and put this question to them as a "hypothetical situation arising from a potential client's query."

All three were sure it would not be permitted. One felt sure it would constitute tax fraud. The others said they were not allowed to comment on the legal issue, but would have to refer it to their own compliance section if they became aware of it actually happening.

One person referred me to their website, where it states: "you must be either the parent, or legal guardian with parental responsibility for the child or step-child that is receiving childcare. This includes foster children, legally adopted children and situations where you have parental rights during an adoption process."

They told me this rule is included in the user agreements that are in place between the voucher company and the childcare provider, and that breaking it would result in the provider having their account suspended and payments withheld pending investigation.

It is also in the user agreements between the voucher company and the employer. They expect all employers to make this clear when an employee signs up to the scheme.

@itsaboojum
Ok, thanks for the checks! I agree with your previous message that fair and legal shouldn't be confused (I was just trying to clarify I was not looking into tricking the system, but to find a way of doing what seems fair). However, it relies on the assumption that it is against the rules, which is not clear to me - I never saw any of those rules written on their website (Edenred, it just keeps saying it is not refundable, nothing about transferring or being limited to paying for your kid) nor communicated to me. Your latest message clarifies it a bit as at least the providers claim it is against the rules, but I'd like to see those rules! But it's not your job to check this for me, I'll do it after I first contact my company to see if they'll refund me etc.

@PrincessScarlett Yes it's "our fault", but I think the core problem is that the system is faulty. A private company gets to take your money and never return it to you if you don't use it. And there's no way to use it if you move abroad or your kids are too big. This sounds more like a fraud to me than what I'm suggesting. Also, of course they don't pay you any interest on your money that is locked with them, that would just be silly.

On your comment that activities your kids are interested don't take vouchers - I've been told by some people at work that actually it's not too hard to get the club administrators to sign up to the scheme, so might be worth asking if they're willing to do it.

OP, I have asked many kids activities about signing up to take childcare vouchers and all of them have come back saying its something they are thinking about or they have dismissed it as the process looks too complicated. I have explained how easy it is to sign up and they just are not interested. It is so frustrating!

Hi OP. I’m a childcare provider and I know that vouchers can be refunded by the voucher company/payroll (depending on which company you use). We’ve sorted it for a few families in the past. You will have to pay tax and NI on it, though, as you won’t have paid tax on it when it was deducted from your salary. Childcare providers are strictly not allowed to refund it themselves, as we aren’t able to deduct tax/NI.

It’s really easy to register with the different voucher companies; I’ve registered for about a dozen according to what company our parents use. You do have to be ofsted registered in order to accept childcare vouchers, though, so without an ofsted registration number it will be impossible to sign up to any voucher company. Lots of out of school activities will not be ofsted registered, I imagine, as they’d be exempt.