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

[SardineQueen]

I've recently become self employed and have found that I can deduct pretty much anything to do with my work from my tax bill, bar childcare costs. Given that childcare is pretty much a fundamental to working, if you have children, easily as much so as petrol or car insurance or a printer cartridge or whatever it might be, why is it not allowed as a business cost? (Sorry if have the jargon wrong).

This is also linked to what I thought at the time of the MP expense scandals. They were claiming legitimately for all sorts of things - cars houses duck houses decorating you name it. There was a female MP though who got told off for claiming for her nanny. Claiming for her cleaner, or gardener would have been fine. But not the nanny, and no-one in the papers seemed to question this rule. Surely in terms of enabling a woman to work (or enabling both parents to work if we want to put it properly!!!), a nanny or other childcare is absolutely essential. But it's not allowed.

Does anyone know WHY?

My guess is tradition, systems being set up to serve men, and possibly expense.

Has anyone ever questioned these rules, and if so does anyone know what the official response is? Because when you look at it without the filter of current practice on, it is totally illogical. It makes no sense.

Himalaya that's all very interesting but I wanted to talk about the principles rather than nail down a specific actual policy!

It's not really about the fine detail of what happens now and what used to happen and this and that. I don't really know or care how working tax credits work.

My point is that I can't see why childcare isn't seen as a valid expense for working people. When lots of other stuff is. I think it is unfair and the reason it happens is because these systems were designed by men for men.

My point is that in principle, there is no reason that childcare costs should be any different from other costs, when looking at the rules for self-employment.

And that as a general principle, it would be good if it was deductible / could be taken from pre-tax earnings for employed people.

And an idea that there is no good reason that childcare is not currently seen as a valid expense when lots of other things are. The reason it is not, is historical and as Dittany says, sexist.

The benefits system is the benefits system and I don't intend to sit down and overhaul it in its entirety to discuss a general principle.

Sort of repeated myself there!

"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.

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.

SQ - but loads of people have explained the principle of why childcare falls into the list of unexpensable but crucial things like: lunch, shoes, transport to work etc... and not into the list of workplace expenses such as toner cartridges, phone bill etc....

The things you can expense as a self employed person, are the same as the things that you would pay for if you employed someone else in your business.

If you required them to wear a uniform you would pay for it, it if you required them to wear shoes (any shoes) you wouldn't. Just because you as an employer require them to be at work without their child, or their dog or their elderly grandparent doesn't mean you as an employer would therefore take on the responsiblity of paying for their childcare, their dog care or elder care.

In the same way your business doesn't take on the responsibility of paying for your childcare.

Himalaya, So you are saying that you think it is correct that childcare is not counted as an expense in this context and that makes perfect sense to you?

In that case I think we will have to agree to disagree.

Is the point that things such as petrol costs etc are deemed necessary for the running of the business. Having a child is not and therefore there is no need for the Government to seek to sunsidise it.

Having childcare is necessary for running a business though.

Trust me I know

SQ -

making childcare a business expense for tax purposes seems like it ought to be simple and intuitive and fair, and that is what I thought when I started up in self employment too.

...then I asked an accountant friend and she explained to me why it isn't a business expense, and why it would be regressive as a tax policy- taking money from the less well off and giving more to higher earners - and her explanation made sense, so I am trying to explain that to you (...maybe not as well as she did for me).

The principle is that being self employed or being employed shouldn't make a difference for tax purposes in terms of what is a business expense (what the business pays for) and what is a living expense (whatever the employee decides to spend their own money on).

So if care expenses are included as self employment expenses they would also have to be included as employment expenses, which would mean employers paying for childcare costs. Which I don't think is where we want to go?

I don't think there is a sensible solution to subsidising childcare through tax deduction that will benefit lower earners that much. Even if I paid no tax whatsoever on my earnings, I still would be worse off under that system than I currently am getting 55% paid for by WTC.

I think the only way to go with childcare is to make it massively subsidised so it is either free or affordable. It will mean we all have to pay more in taxation for it, but I don't have a problem with that. Sadly, I suspect many people (more men than women) will, which is why no political party will ever have the balls to suggest it.

I have no truck whatsoever with the arguments that it's totally unreasonable or impossible to achieve. Same things were said about free education, the welfare state and the NHS. It only takes political will.

I agree with sunshine, I don't think that free or heavily subsidised childcare will be on the political agenda in the foreseeable future. To fund it we would need to see fairly large tax rises and I don't think that people would accept it and it would be a vote loser at an election.

Himalaya if people were allowed to pay for their childcare out of their pre-tax earnings (as per childcare vouchers) that wouldn't mean the employers were paying for it

For me it's the principle. All this "but you'll effectively be taking away from lower earners" stuff is assuming that we keep everything else the same. But this is a theoretical discussion - no government is ever going to do this in the foreseeable future, nor are they going to provide free high quality universal childcare.

It's just the general point that things that enable men to work are counted as expenses, while things that enable women to work are not. So cleaners, gardeners and so on (thinking the MPs and self-employed) - fine. Childcare - not. It doesn't make sense to me.

That's all, really.

That's the thing though you can't claim for your cleaner, your gardener as a business expense. The MP thing is a different situation and a bit of a red herring.

I agree it would be completely unfair if you could claim your gardener, cleaner against your taxes but not your childcare, but you can't.

You can claim 1/5 of the cleaner if you have a 5 room house and one room is for business use...it is not because the cleaner allows you to get on with work.

You can claim for the cleaner as you rightly point out.

The cleaner spends 1/5 of their time allowing you to get on with your work in a clean environment, you claim 1/5.
A childcarer spends 1/5 of their time allowing you to get on with your work in a child free environment, you claim 1/5.

Do you believe that the state should assist families with childcare, Himalaya, or not?

Is it the nitty gritty of how the tax system works at the moment that you are arguing, or the principle?

The point about all of our laws is that they can be changed. If the taxman said this could be claimed, it would be claimable.

In principle it's a good idea in reality I doubt it will ever come to be (at least not in the near future) as it would be a vote loser, people don't really like the idea of higher taxes.

You would have to get rid of the your child your problem mentality. People no longer want anything to do with other peoples children and they certainly don't want to pay for others either. Society needs men to be more involved with children at the same time society will have to reduce the fear of men being around children.

Even women are not all children friendly, I have seen countless posts on MN with people saying they like their children but don't want anything to do with other peoples so this would be a difficult battle.

I wonder how much extra tax would be generated by all the women being free to go out to work though?

They always say that it's not cost effective having lots of very capable women stuck in at home... Has anyone ever put a monetary value on what the cost of this is I wonder.

Any attempt to bring free childcare or heavily subsidised childcare would be very unpopular and frankly I can't ever see it happening. We have very individualistic attitudes in this country and we see other peoples problems as theres to sort out on their own with many resenting almost any attempt by the Government to help. I think many people would simply say your child so childcare is your responsibility and you should pay for it.
The tax rises needed to fund it would be a major vote loser and I can't see any of the 3 major political parties proposing it in the near future.

People don't kick off about school though, do they. And a certain amount of hours are paid from age 3... So it's not as bad as all that - I mean society doesn't shout and scream that those things should be cancelled.

Ok, so I've been thinking more about this. Can you hear the cogs turning?

If you think about Victorian attitudes to the 'deserving' and 'undeserving poor' and realise that less than 100 years later we have a Welfare State, I think it actually is possible for a government to introduce massively subsidised childcare.

However, this is one of those developments that I think will require a cultural shift to create the drive for a legislative one. That said, we would need to use some legislature to create the framework for that cultural shift.

If childcare was primarily the responsibility of men, you can best your last £ that subsidised childcare would be the norm. So how do we get more men to become actively involved in caring for children? (This doesn't necessarily mean being the primary carer, btw.)

First we need to change paternity/maternity legislation to encourage more men to SAH. Now that's still not easy to do but it's a lot more achievable than trying to push through legislation to create free nurseries for all.

Secondly we need to create a zero tolerance for men who don't pay maintenance.

Thirdly, maintenance should have an additional element, quite separate to the cost of keeping, which should be a contribution towards childcare if the woman works. I would like to see this being offsetable (is there such a word?) if men were taking on more childcare responsibilities, but we would need a very tightly controlled framework for this to ensure that children weren't being looked after by unreliable, feckless and uninterested twats just to get out of paying some money.

Fourthly, well actually I've run out of ideas but I'm sure you can all think of some.

It may take years before these changes have a noticeable effect, but I would hope that eventually they would make the idea that children are the responsibility of BOTH parents completely mainstream. When that happens, we will be much, much nearer being able to introduce free or nearly-free nurseries etc because the demand would cross gender.

SQ - in your cleaner example, I think you are misunderstanding the principle.

If you are self employed and you have a workshop somewhere for your business and you employ a cleaner for an hour a week. That's a business expense, just like if you employ anyone else to provide a service for your business.

If you employ someone else as a cleaner at your house for 4 hours a week that's not a business expense.

If you move your workshop into the spare room at home and you employ the same cleaner for your domestic and your business space, it's the same thing - they are doing work for the business for 1/5 of their time - so that's a business expense.

Soooooo

If I decide to create a creche at work, shouldn't I be able to claim that as a business expense. Because it's totally at work and the staff in the creche would be providing services to my business for me (and any future staff).

Based on the cleaner cleaning business premises?

Just catching up!

"Thirdly, maintenance should have an additional element, quite separate to the cost of keeping, which should be a contribution towards childcare if the woman works.

Yes! Why doesn't this happen?