Childcare - an allowable/valid limited company expense?

[Cora123]

Background - I am new to IT Contracting and have just set-up a new limited company

Quick question - I have three children under the age of 6 years old so my childcare costs per month are high! As the sole employee/director of my small limited company can I claim some/all of this as an expense? It is 'wholly' required for my company as I could not work/earn unless I have childcare in place.

Note - my childcare provider is a registered ofsted approved childcare professional and provides me with a monthly invoice.

Advice please. Thanks in advance.

[chopper]

Let me google that for you

Your company can pay your childcare provider up to £243 per month as childcare vouchers. You wouldn't be subject to personal tax, this would be an allowable expense against company profits.

Anything above £243 would be a BIK and so subject to personal tax and NI (i.e. as if you had been paid the cash as a salary before giving it to your childcare provider).

Very simplistic view there, Google it and then ask your accountant. The £243 may be lower if you pay yourself into the 40% tax bracket.

[northernladuk]

Let me search the forums for you

Plenty of threads on this topic so lots of good advice on the forums about this.

Don't forget to spend time with your accountant. You should be able to explain your situation and they should be able to advise on all the possible options for you and how it all works.

[TheCyclingProgrammer]

Let me google that for you

Your company can pay your childcare provider up to £243 per month as childcare vouchers. You wouldn't be subject to personal tax, this would be an allowable expense against company profits.

Anything above £243 would be a BIK and so subject to personal tax and NI (i.e. as if you had been paid the cash as a salary before giving it to your childcare provider).

Very simplistic view there, Google it and then ask your accountant. The £243 may be lower if you pay yourself into the 40% tax bracket.

The company can only pay directly if the contract is between the company and the childcare provider though. If the bill is in the parents name it cannot be paid by the company. In this case, you'll either need to get the contract changed or go down the voucher route. Vouchers are paid to the employee, not the childcare provider.

You'll also need to do the pen pushing exercise of an annual earnings assessment in either case.

[ASB]

BIM37000 - Wholly and exclusively: contents

It is 'wholly' required for my company as I could not work/earn unless I have childcare in place.

Whilst there are some things you can do with childcare provision funded by the company it is in absolutely no way wholly required for the company. It is not required at all. Childcare give you the ability to work not your company

you cannot provide indirection in deciding wholly.

[northernladuk]

What ASB says. Some people do struggle with the wholly and exclusively rule of thumb. The number of arguments I've had with tick box contractor about suits and cars being wholly and exclusively in their minds....

[psychocandy]

The company can only pay directly if the contract is between the company and the childcare provider though. If the bill is in the parents name it cannot be paid by the company. In this case, you'll either need to get the contract changed or go down the voucher route. Vouchers are paid to the employee, not the childcare provider.

You'll also need to do the pen pushing exercise of an annual earnings assessment in either case.

I pay childcare via the company. Both to a registered childminder and a nursery. One I pay by bank transfer one by company cheque.

Heres what my accountant told me:-

1. You need to have something in writing to the provider to say that you're company is going to pay for childcare for your employee (you) and its going to be £x (or different) amounts per month.

2. The monthly figure doesnt matter. i.e. you can have different amounts each month. As long as the annual total of 12 x £243 = £2916 is not exceeded.

My costs exceed this so all I do is keep a spreadsheet to ensure I only pay this out a year. The rest then is paid using dear wifes childcare vouchers.

Dont overdo these because she doesnt pay any tax (only works part-time) so savings are limited. Better for me to pay and save on 20% CT.

[TheCyclingProgrammer]

When my daughter was a nursery I just signed the contract as company director and made it clear the contract was with MyCo.

Their system still generated statements in our names but the nursery manager was happy to provide me with an invoice each month addressed to the company too. The statements went in the bin and the invoices get scanned and filed with the company books.

As you say all you need is some evidence there is a direct contract with YourCo. A simple written agreement and/or invoices to YourCo should be sufficient.

Don't forget if your partner or spouse is a company director or secretary you can effectively double the amount you can pay if they don't already receive vouchers elsewhere.

[psychocandy]

When my daughter was a nursery I just signed the contract as company director and made it clear the contract was with MyCo.

Their system still generated statements in our names but the nursery manager was happy to provide me with an invoice each month addressed to the company too. The statements went in the bin and the invoices get scanned and filed with the company books.

As you say all you need is some evidence there is a direct contract with YourCo. A simple written agreement and/or invoices to YourCo should be sufficient.

Don't forget if your partner or spouse is a company director or secretary you can effectively double the amount you can pay if they don't already receive vouchers elsewhere.

Yes but I dont keep the invoices though.

Not sure if thats valid about partner. Think they need to be employee not just director.

[TheCyclingProgrammer]

Not sure if thats valid about partner. Think they need to be employee not just director.

Are you an employee? I'm not.

Childcare is available to office holders as well as employees.