Fees charges by Childcare Voucher scheme providers

[silvys]

I am in the process of selecting an umbrella company which I am going to use for an upcoming contract.

I phoned up one of the more reputable umbrellas (Contractor Umbrella) and was shocked when they told me that the provider they use to manage their childcare voucher scheme takes a 10% fee for this.

I have in the past had a limited company and managed my own scheme and the full extent of the work was writing out one cheque a month ....which took all of 30 seconds

Can anyone recommend an umbrella that uses a provider charging a more sensible fee? (Looking around the internet and talking to permies, providers generally charge an admin fee of 2 to 3.5%)

Given this is a saving which the government provides to help working parents with kids it seems like daylight robbery that such a significant part of that saving is being taken away in admin fees for doing almost nothing.

[Waldorf]

Can I ask why you stopped using a limited company?

It is for the reason you state why your own company is the better option even if you are caught by IR35.

Also remember that very soon, umbrellas will have to start enrolling you into the state pension scheme, which will cost you 8% of your income once it is fully up and running.

[silvys]

My limited company is being closed down. Because I will benefiting from 10% entrepreneurs relief.
I’m not really in a position to restart a ‘phoenix’ company the next day – so unfortunately umbrellas are the only other option (unless anyone knows of anything else – not interested in the EBT schemes)

Can you explain what you mean by “which will cost you 8% of your income”? I assume if I was planning to make a contribution to the company pension scheme greater than that anyway then this wouldn’t impact me?

[Waldorf]

Without the details it is hard to say, but not sure why you have closed your company and then gone to a brolly. Depending on why you did this, you could start a new company but you need to discuss this with your accountant to be sure you don't breech any rules. My guess is that you could move to a company now.

If you are happy with pensions, then yes, you can pay more in, my problem is with pensions as a vehicle for my retirement.

[silvys]

My background is the limited company has a large cash balance - going through MVL and paying 10% tax under entrepreneurs relief is by far the cheapest way to get hold of the money.

I've never contributed to a pension in my life, so I've got no problem contributing (very) heavily to one whilst at a brolly - which then makes the brolly fairly tax efficient.

Interesting what you said about moving to another limited company. Are there any guidelines about how long you need to wait before doing it? I was planning to leave it a couple of years to be safe.

[Craig at Nixon Williams]

There are no firm guidelines on this. The purpose of the legislation which affects this (Transactions in Securities) is essentially to stop a tax advantage from arising as a result of closing one company and carrying on the same trade through another entity. To my knowledge there have been no high-profile cases of this legislation being applied to PSCs but where a tax advantage is being gained HMRC could attempt to challenge what you are doing - I guess the way in which you choose to proceed will depend upon your attitude to risk!

[Marmalade]

I am a bit disappointed also to see that Contractor Umbrella proposes to keep 10% of my Childcare Voucher money? I could see maybe charging an initial £10 set-up fee but not sure how up to £24 every month can be justified here?

Where is that CU lady when you need her then?

IMHO they are sullying their brand with this policy.

[LisaContractorUmbrella]

I am a bit disappointed also to see that Contractor Umbrella proposes to keep 10% of my Childcare Voucher money? I could see maybe charging an initial £10 set-up fee but not sure how up to £24 every month can be justified here?

Where is that CU lady when you need her then?

IMHO they are sullying their brand with this policy.

I'm here

Childcare scheme providers charge for administering the vouchers; the company that we use charges 7%. We also have additional costs from processing the vouchers and making payments to the scheme providers which makes up the balance

Would love to be able to do this sort of thing for nothing but if we did I don't think I would have a brand for very long - sullied or otherwise

[warrenboon]

10% seems on the high side, the one I used (a couple of years back) charged 6% but I think they can vary significantly across providers. Their pitch was that the Employer's NI saving more than covered this.

(Bear in mind it's the scheme provider making the charge, not the CU.)

Hope this helps.

[warrenboon]

Right, I see that CU also add a fee for handling it, I guess you could set the scheme up yourself if you wanted to save the 3%. (I'd pay the 3% myself, it's a bit of a fuss to do as a 1-off.)