Childcare Vouchers

[Miasmum]

I have been following the various discussions on childcare vouchers with interest and am at the moment very confused.

I have just, after a year of campaigning, got my employer to agree to childcare vouchers. However I have been told that this will mean accepting a salary sacrifice scheme, thus changing my contract of employment and meaning I won't receive pension contributions on the £800 a month I pay in childcare. It also means that should I get pregnant again it will affect maternity benefit. And mortgage applications, etc, etc.

This is all obviously a problem and I'm just wondering if anyone knows if there is a way round this - do I have to accept the salary sacrifice scheme if I want the vouchers? Is there an alternative? Understandably I'm pd off after having campaigned for a year for vouchers.

I also understand from correspondence with our outsourced payroll that I will also not pay tax on the monthly amount and then will have to pay tax in one lump sum at the end of the tax year. Again not an ideal situation, if this is true.

Any help/advice/comments would be really appreciated.

I'm a teacher and get vouchers from Surrey county council, I don't have any of the penalties you describe. The company who provide the vouchers are called Accor don't know if its worth contacting them.

I'm a teacher and get vouchers from Surrey county council, I don't have any of the penalties you describe. The company who provide the vouchers are called Accor don't know if its worth contacting them.

I also receive childcare vouchers. I think it might be an idea to speak to Accor. Sorry can't be of more help.

miasmum,

It entirely depends upon how strictly your employer (and their tax office) interpret the legislation. Many employers have chosen to 'not notice' the salary sacrifice element. But, basically, yes your employer is correct, and no there is no way around it. This was the reason I chose not to push any harder for the scheme with my employer. You should also be aware that a salary sacrifice is effectively forever (even when you no longer need vouchers for childcare) unless you can persuade your employer to change your contract back.

In theory, now that vouchers have been given an 'official' treasury blessing in the latest budget, things might change come April 2005. But I think we need to wait and see what the Inland Revenue say.

thanks for the advice. I feel so cheated after campaigning so hard to get them and now it doesn't seem to make any sense to take them. Especially as we are thinking of moving and we need my full salary to be taken into consideration. I am trying to get through to my local tax office to check my company's position but don't hold out much hope of anything being different.
Let's keep fingers crossed things might indeed change next year!!!

I am trying to get my employer (Islington Council) to offer childcare vouchers to their employees but I didn't realise it would affect pensions and maternity benefit, as well as tax at the end of the year - I tyhought it was tax-free and it seems completely contradictory that it would affect maternity benefit. Has anyone had a happy solution with this?

Hi, We have a (fairly) successful salary sacrifice scheme - with the nursery fees deduction from my salary saving me NI, though it is taxable.
The agreement I signed with the company states that I can alter the arrangement with 1 months notice, and I have successfully reduced the amount of fees already when I reduced the days ds was there.
The agreement also states that it does not afect my 'pensionable' pay - so my pension deductions are 6% of the pre-sacrifice salary, and my pension would be based on that amount.
Mortgage applications: I wasn't on this scheme when we applied for our mortgage, but we did need to state childcare costs on the application, which were deducted from the relevant amount - so if you have salary sacrifice you would have no additional childcare costs, therefore be in the same position.
Maternity pay: your statutory mat pay is based on 90% of your salary, and the salary is based on what you earn in the 2 months before the 'qualifying week', which is 15 weeks before the EWC. So I work that out the be approx 40-15-8=17 weeks pg. So, given the arrangement to cancel, I reckon I can just cancel when I tell the co I an pg at about 12 weeks (probably cancel sooner, in case it takes a while to sort out - sometimes our payroll is a bit slow).

Hope this helps - I think the system is a pretty good one, saving NI and some tax from next year. Actually, with the slight mat pay juggling issue, it could make more sense to for the man to take them if possible.

Hope this helps a little.

SF

Actually from next year for most people it will make sense for you both to have them, as it's going to be capped at £50/parent/week. If your childcare is less than that, then whoever earns most (i.e. pays the tax at the highest rate on pre-voucher income) should have them to maximise the tax/NI saving.

The exception is if the higher earner is in the band where NI goes down to 1%, but tax is only 22% (between about £31700 and £36200), and the lower earner is earning more than about £9300 (before deductions for vouchers in both cases) in which case it is generally better for the lower paid partner to have them.

Figures will change slightly next year when the new tax allowances are announced. And of course it all depends upon you both having employers offering vouchers so you can choose - which probably makes it academic for most people