Childcare vouchers

[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.

[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.

[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.

[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.

[chrisl]

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.

[Chugnut]

There is hardly any administration required after the initial setup. If you go to the trouble to run your limited, run your own voucher scheme. It's really simple. Everything you need is here - http://www.hmrc.gov.uk/childcare/

Just design a poster / memo advertising the scheme (I did mine in Word in 30 minutes) and state it must be available to all employees of MyCo. I googled what an example childcare voucher looked like and designed my own in Word. Monthly administration consists of printing off a voucher, and signing it, childcarer countersigns it and returns it to me. £243 is paid directly to her account from MyLtdCo. All you have to do to meet the obligations of the scheme is to make a note of their OFSTED registration number and when it expires.

If you are within the weekly £55 or monthly £243 limits it does not have to be reported on the P11d either (only if it's for more than this). The voucher amount makes up part of your remuneration and is used to reduce YourLtdCo Corp Tax bill.

[blacjac]

If you set up via a Childcare Voucher specialist company such as Accor (I have set up an account with them but not starting contracting yet so have not activated the account) you would pay 8% of your voucher total per month in admin fees but you save on both Company NI contributions and your own NI contributions. What I am not sure about is whether this is more beneficial than the method of paying from YourCo account and taking the cost out of your profits for Corporation Tax calculation.
I did find Accor very helpful and efficient (and no, I do not have any link with them, just used them as a permie so stayed with them for myCo).

S

www.kiddivouchers.com charge 2.5%, but they are online only I believe.

[SteveCo]

If you set up via a Childcare Voucher specialist company such as Accor (I have set up an account with them but not starting contracting yet so have not activated the account) you would pay 8% of your voucher total per month in admin fees but you save on both Company NI contributions and your own NI contributions. What I am not sure about is whether this is more beneficial than the method of paying from YourCo account and taking the cost out of your profits for Corporation Tax calculation.
I did find Accor very helpful and efficient (and no, I do not have any link with them, just used them as a permie so stayed with them for myCo).

S

[chrisl]

Ok thanks for that.

I was just trying to work out if 'less attractive' meant worse off or just meaning more hassle in respect of administration, P11D benefit etc but still beneficial.

[slackbloke]

Cheers guys, i have looked at those already, i did do a search but it only talks about the standard £55 per week. Nothing is mentioned about claiming more and whether you will be worse off by claiming the full £800 a month or if there will be a benefit but only a slight one.

It is in those threads :

The best way to claim childcare vouchers via your own Limited Company is to pay £55 per week from your company account directly to your provider and the balance personally, the £55 PW can be claimed as an expense against corporation tax saving 21% and potentially another 25% in reduced dividends.

If you paid the whole cost from your childcare provider the balance over £55 would be a benefit in kind incurring tax personally and NI in your company making this option less attractive.

i.e. vouchers up to £55 and paid the rest yourself

[chrisl]

Cheers guys, i have looked at those already, i did do a search but it only talks about the standard £55 per week. Nothing is mentioned about claiming more and whether you will be worse off by claiming the full £800 a month or if there will be a benefit but only a slight one.

[oracleslave]

Have a look here

http://forums.contractoruk.com/accou...ight=childcare

and here

http://forums.contractoruk.com/accou...ight=childcare

[moorfield]

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.

Do a search on "moorfield", "childcare vouchers", or "kiddivouchers" and you'll see I've posted on this topic before.

[chrisl]

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.