29 September 2010

The Institute of Payroll Professionals (IPP), along with the UK’s four largest childcare voucher providers and the Federation of Small Businesses (FSB) are calling upon HM Revenue & Customs (HMRC) to issue further guidance about the forthcoming changes to the tax and National Insurance contributions (NICs) exemptions for employer-support childcare vouchers, due to come into force from 6 April 2011.

In order to voice IPP members’ concern of the lack of guidance that was promised by the Government in the summer, the Institute collaborated with the FSB, Computershare Voucher Services, Edenred, Grass Roots Group and Sodexo Motivation Solutions in lobbying HMRC to provide further clarification on some common key concerns, including:

  • The proposed new regulation is potentially very burdensome for employers, which could risk undermining support for childcare vouchers – a vital scheme helping parents return to work.
  • Delay in publishing further guidance on the upcoming changes will result in a lack of time for software developers to create the system requirements for payroll packages. A lack of functionality will increase the administrative burden for employers who run childcare voucher schemes.
  • Further clarification is needed of the definition of joining or leaving childcare vouchers schemes. For example, if an employee has been in the scheme and then goes on to unpaid leave, where no vouchers are paid, does the employee have to re-enrol under the new guidelines or will they recommence when pay is received and continue to save tax and NICs at the previous rates?
  • Employers have also raised concerns that if an employee is assessed at the start of the tax year as being within the 50% tax band, then reduced their hours, this may mean that they then fall within the 20% tax band, but continue to receive childcare vouchers under an assessment based on being a 50% taxpayer. Some have argued that this be seen as being treated unfairly as part of the Part-Time Workers Regulations.

Elaine Gibson, Senior Policy Officer at the IPP, said: “The IPP Policy team recognises that its members are generally concerned about the forthcoming changes to childcare vouchers and more so because further guidance promised for the summer has not yet materialised.

“As a result, a briefing document and covering letter written on behalf of the IPP, FSB and the childcare voucher providers involved, was recently submitted to HMRC for comment. As we are fast approaching the implementation stage for the announced changes, the IPP and others are urging the Government to provide the guidance imminently in order that employers will be ready to comply in April 2011.”

To read the Policy briefing and letter to HMRC in full, visit: