Are you a Limited Company Director looking to save money on childcare by setting up Childcare vouchers? Well, we hope this little guide will help you out.
How the Government Childcare Voucher Scheme works for you in 5 easy steps:
Step 1) Check your third-party child care provider is registered with the OFSTED scheme.
Step 2) Set up scheme with HMRC/or through the scheme administrator.
Step 3) Tell your Accountant so they can account for this accordingly.
Step 4) Make a decision between Salary Sacrifice or Business Expense processing of the childcare vouchers.
Step 5) Start saving money on childcare – happy days!
The Government Childcare Voucher Scheme provides exemptions on childcare or childcare vouchers provided by employers. If you are a Limited Company Director hoping to save some money on Childcare, you must remember that you are both the employer and the employee.
If you have a child, who is currently being cared for by a third party (Crèche/nursery/childminder etc.), as a Limited Company director, you need to register for the childcare voucher scheme through HMRC or use a scheme provider who does the admin for you and charges a commission rate – which you can then offset as a business expense.
How Much Do you Save?
Once you are part of a childcare voucher scheme, the maximum value of childcare you can claim is £55 per week, or £243 per month.
This amount is allowable for both parents – this will be applicable to many of our Limited Company Directors who have a husband or wife as an employee. This amount has been set by HMRC, with the understanding that anything above this amount will be liable for Tax and National Insurance on the amount, anything below this limit is exempt from this.
You have two options on how to process this transaction. Either you process this through your employee payroll in the form of Salary Sacrifice, or you process this as an Employer Business expense- deducting this from profits. You should not do both. Measure up the costs involved for yourself and the company when making this decision.
What if my child care costs more than £55 per week?
If child care costs to a third-party carer exceed £55 per week or £243 per month, the ‘extra’ payment needs to be noted on a P11d expense form. If you are a FW Accounting client and would like more information on how to treat your childcare vouchers or how to enrol on the childcare voucher scheme, your dedicated Account Manager will be more than happy to help.
The Qualifying conditions:
- The childcare provider is either registered or approved by the scheme. The scheme is called OFSTED: ‘Raising Standards; Improving Lives’, which can be either a nursery, crèche, play scheme or registered childminder.
- The child is:
- A child or stepchild of the employee at whose expense the child is maintained. Please note that as a Limited Company Director, you are both the employee and the Employer. or
- A child who is living with the employee and for whom the employee has parental responsibility.
- A child can qualify for this scheme up to the 1st of September after their 15th birthday (or 1st September after their 16th birthday if they are disabled).
Payments must be made to the childcare provider from your Business Bank Account.
You can read a full article from HMRC about the Government Childcare Voucher Scheme here.
QAccounting. You Count. We Count.
The article outlines the typical tax payment dates and methods of estimating the values of tax payable for each type of tax, including VAT, PAYE, NIC, CIS, Corporation Tax, and Dividend and Personal Taxes.
Rishi Sunak has proposed a number of changes to the way that Corporation Tax will be calculated and applied. Learn more.