Childcare vouchers

[Chugnut]

Correct me if i am wrong but if i wanted to put a full £800 through a month it would still be beneficial.

Saving:
£800 x 21% Corp tax = £168
£800 x 20% on salary sacrifice = £160 + Employers and employees NI amount???
Total = £328+

Cost:
745 x 12.8% Employers NI = £95
745 X 20% BIK = £149
Total = £244

I have a min wage salary so NI would be minimal.

Sorry, I haven't ever needed more than the £243 per month, as my wife's employer runs a voucher scheme and covers the extra we need (only one kiddie), so I've never got into the whole BIK side of things.

Can't your accountant offer some wisdom here? If you do decide to do it, if you use an external provider, you're just eroding the savings you're making. Once they've done the initial setup admin, the monthly fee is money for old rope.

[slackbloke]

Correct me if i am wrong but if i wanted to put a full £800 through a month it would still be beneficial.

Saving:
£800 x 21% Corp tax = £168
£800 x 20% on salary sacrifice = £160 + Employers and employees NI amount???
Total = £328+

Cost:
745 x 12.8% Employers NI = £95
745 X 20% BIK = £149
Total = £244

I have a min wage salary so NI would be minimal.

Don't think the figures are correct, you only get the salary sacrifice benefit on the £55 a week, and similarly you don't save the emp'er or emp'ee NI above £55. If you pay the extra money yourself it hasn't cost any extra tax or NI (unless you increase your salary to cover it which would then be offset against corp tax). So it is corp tax saving (20%) versus BIK + NI ( > 20%).

Also, pointless using a company to do vouchers for you, there is very little admin required, just creating a voucher.

[THEPUMA]

Based on the fact i am a one man band limited company i was trying to find out the best way to pay for my child care.

Two kids that cost me £800 per month in childcare costs.

Being either a higher rate or basic rate taxpayer, would it still be worth while claiming the whole £800 in vouchers and suffering the tax and NI consequences for me and my company as im going over the £55 per week.

I just thought i would ask here before i tryed to work it out myself.

The basic answer is that you would usually be better off taking it as a dividend than a benefit-in-kind. However, there is one shimmy of which I have only recently become aware.

There are some childcare voucher companies that claim that you can fund unlimited levels of childcare through your company tax-free by claiming to have an employer-sponsored creche. HMRC acknowledge this possibility and the following link (and sublinks) gives their stance on it:-

http://www.hmrc.gov.uk/manuals/eimanual/EIM21920.htm

I did have the details of one company offering this but can't recall it off the top of my head. If anyone is interested, I can find out.

These schemes seem aggressive but if the companies are dotting all the appropriate is and crossing the ts, I don't see any reason why they shouldn't work.

[Tiptopp]

I've been talking to my accountant about this, who initially said that it wasn't possible to take more than the actual cost of childcare, although eventually acknowledged that you are allowed to store up vouchers (although not worth issuing more than £55 per week).

However, she has also said that her Inland Revenue contact says that 'Inland Revenue are increasingly looking into the provision of childcare vouchers to directors of companies. He recommended to try to stop such an attack for you to ensure you have a written employment contract with the company stating your salary as well as written documentation showing your salary sacrifice to receive childcare vouchers.'

This employment contract would force me to pay myself minimum wage and issue payslips. This therefore creates a PAYE and NIC charge, which will be more than the benefit of the vouchers.

Has anyone else had advice from their accountant along these lines? If not, I'm likely to take the risk and issue the vouchers myself. If I recall, the best way is to add them to salary (so salary is effectively £155 per week with £55 salary sacrifice to pay for the vouchers).

Any comments?

Regards,

Tiptopp.