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Proposal for the withdrawal of tax and NI free childcare vouchers

Proposal for the withdrawal of tax and NI free childcare vouchers
Tuesday, 27 October 2009 23:04

The Prime Minister announced at the Labour Party Conference this month an extension of free nursery places. These are to be financed by the withdrawal of tax and National Insurance exemption for childcare vouchers.

The proposal is being made that extends the provision of free nursery places to two-year-olds, This is in addition to the current provision for all three and four year olds. By 2015/16 it is expected that 250,000 children could benefit.

Alarm bells imediately regarduing the withdrawal of the current tax/NI exempt status for childcare vouchers currently provided by the employer. Under the current regime there is an exemption from tax and NIC (up to £55 a week) subject to a range of conditions being met. Excess over £55 is taxable and NIable in the normal manner. 

The current understanding, in advance of full details due in the 2009 pre budget report, is that from April 2011, employees who join an employer-supported voucher schemes will not be entitled to the existing exemptions.

Thise already in schemes are likely to be unaffected until April 2015, at which point the exemptions for vouchers will be withdrawn.

Voucher schemes themselves are not being withdrawn, just the tax breaks on them - though clearly the loss of the tax advantages is likely to have an impact on the operation of such schemes.

These proposals are a long way off and with ossible changes in government next year it remains to be seen whether the government at the time will actually go through with this proposal.

A group of 16 childcare voucher providers have already joined forces to lobby the government on the removal of the tax relief provision. 

A petition on the number 10 website has also been launched. You can add your name to that petition here

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