Child care scheme / Voucher

[pnakhat]

Hi,

I am a Director of Limited company and my spouse is a employee and share holder.


Our son is going to Nursery and his monthly cost is about £360. I am bit confused with the whole childcare scheme business.

1) Can I pay child care directly from my company account and split the whole amount between myself and mty wife like £180 each.

2) Is there any legal documentation I need to do in order to start the scheme with Childcare?

3) Also, its been three months since my son has been going to nursery and I have been paying from my personal account, can I now reimburse that amount to my company ?

Can some one please help me with step by step process.

[Clare@InTouch]

A company can pay up to £55 per week, per employee. The payment must go direct from the business account to the provider, and they must be an approved and registered provider. The children in question must be 15 or under too.

There's no legal documentation as such, you should just keep records to back up the purchase.

You can reclaim any prior childcare costs as expenses, but it will be deemed as taxable income:

You provide an employee with childcare support in any of the following ways:
reimbursing the employee for their childcare bills
providing a cash allowance to cover childcare costs
providing additional salary to meet the cost of childcare

What to report, what to pay
In most cases the amount you reimburse counts as earnings, so:
add it to the employee's other earnings
deduct and pay PAYE tax and Class 1 NICs using your usual payroll procedures

HM Revenue & Customs: Childcare


You should also consider the changes that came in on 06 April 2011 that may affect you if you're a higher rate taxpayer, in which case the rate allowable drops to £28 a week (or £22 if you're an additional rate taxpayer). http://www.hmrc.gov.uk/thelibrary/employer-qa.pdf

I'd suggest talking to your accountant who would know your situation in full and be able to give specific advice.

[jmo21]

A company can pay up to £55 per week, per employee. The payment must go direct from the business account to the provider, and they must be an approved and registered provider. The children in question must be 15 or under too.

There's no legal documentation as such, you should just keep records to back up the purchase.

You can reclaim any prior childcare costs as expenses, but it will be deemed as taxable income:

You provide an employee with childcare support in any of the following ways:
reimbursing the employee for their childcare bills
providing a cash allowance to cover childcare costs
providing additional salary to meet the cost of childcare

What to report, what to pay
In most cases the amount you reimburse counts as earnings, so:
add it to the employee's other earnings
deduct and pay PAYE tax and Class 1 NICs using your usual payroll procedures

HM Revenue & Customs: Childcare


You should also consider the changes that came in on 06 April 2011 that may affect you if you're a higher rate taxpayer, in which case the rate allowable drops to £28 a week (or £22 if you're an additional rate taxpayer). http://www.hmrc.gov.uk/thelibrary/employer-qa.pdf

I'd suggest talking to your accountant who would know your situation in full and be able to give specific advice.

What am I missing? How does a 1 man contractor ltd benefit from this?

If you have to deduct PAYE and NIC's, then it's just the same as increasing your salary by the same amount?

Edit: ah right, it's the first £55 that is NOT subject to PAYE and Nic

from the link:
"The first £55 per week is exempt from tax and NICs and doesn't need to be reported to HMRC, provided all the following conditions are met:"

Woudl that £55 per week be classified as a normal expense for my company to offset against corp tax?

[Clare@InTouch]

What am I missing? How does a 1 man contractor ltd benefit from this?

If you have to deduct PAYE and NIC's, then it's just the same as increasing your salary by the same amount?

Edit: ah right, it's the first £55 that is NOT subject to PAYE and Nic

from the link:
"The first £55 per week is exempt from tax and NICs and doesn't need to be reported to HMRC, provided all the following conditions are met:"

Woudl that £55 per week be classified as a normal expense for my company to offset against corp tax?

The first £55 is tax free if it's paid been direct from the company. If you're joining the scheme after 6 April then that £55 may be lower depending on your tax rate.

If it's prior costs that you're reimbursing then it's taxable in full on the employee.

You can claim it as a deduction against your CT.

It's also worth seeing how this interacts with any tax credits you may be claiming. HM Revenue & Customs: Childcare vouchers and tax credits - better off calculator

[jmo21]

The first £55 is tax free if it's paid been direct from the company. If you're joining the scheme after 6 April then that £55 may be lower depending on your tax rate.

If it's prior costs that you're reimbursing then it's taxable in full on the employee.

You can claim it as a deduction against your CT.

It's also worth seeing how this interacts with any tax credits you may be claiming. HM Revenue & Customs: Childcare vouchers and tax credits - better off calculator

thanks Claire, I'll look into this tonight. I think we get £80 a month from the government for the baby, but not entirely sure what it is, will speak to the missus tonight, she dealt with that.

[Lumiere]

it may also be a good idea to ask nursery to provide you with invoices addressed to yourltdco

also there is a requirement that the scheme must be available to all employees, should be easy to fulfil in case of 1-2 man companies though

[jmo21]

Resurrecting this thread...

Can I simply pay childcare costs direct from my company account to a nursery or do I need to use one of these voucher providers?

[Lumiere]

yes, you can

[jmo21]

thanks!