Tax-free doesn’t always mean stress free

27 November 2017

This article was featured in the December 2017/January 2018 issue of the magazine.

Samantha Mann MAAT MCIPPDip, CIPP senior policy and research officer, outlines a compensation scheme in respect of operational issues with the tax-free childcare scheme

You know that teething problems are occurring when details of a compensation scheme appear on GOV.UK.


A brief re-cap

Tax-free childcare (TFC) launched in April 2017 and is being rolled out to parents by age of the child, starting with parents of the youngest child. When their youngest child becomes eligible, they can apply for all their children at the same time. Parents can find out who the service is currently available to at They can also sign up to receive an email alert to notify them when their youngest child becomes eligible.

Parents whose youngest child was born on or after 1 April 2013 can now apply at

A parent cannot be in receipt of TFC and childcare vouchers (CCVs) at the same time and will need to provide a written notification (which can be an email) to their employer to indicate that they wish to stop their vouchers when they move to TFC. This notification needs to be provided within ninety days of the parent making a successful application.

Once an employee has given this notification to an employer they cannot return to that employer’s voucher scheme. The parent could, however, join a different childcare voucher scheme if they were to commence employment before April 2018 with a new employer which offers such vouchers. The parent would then have to stop reconfirming for TFC.

Unused childcare vouchers can still be used after moving over to TFC and there is no time limit by when they need to be used.

Childcare Choices is the information delivery vessel which introduces the support available to working parents for early education and childcare and increasingly this information and guidance (scant as it currently is) will be found on GOV.UK.


...refunding any reasonable costs directly caused by the service not working as it should,mistakes or unreasonable delays


Compensation scheme

In September 2017, HM Revenue & Customs (HMRC) published guidance on compensation for parents who had experienced problems accessing their TFC account. HMRC are aware that some parents and providers have experienced technical difficulties with the childcare service and send their apologies for this. HMRC continues to make progress in resolving issues and are monitoring issues and take on board feedback.

The guidance looked to explain what compensation claimants might be entitled to if they have been unable to access TFC because of the technical issues with the childcare service. Examples of issues parents may have experienced that could make them eligible for compensation include:

  • being unable to complete the application for TFC

  • being unable to access their childcare account to make a payment to the childcare provider – where parents have to use their own account to make the payment the compensation will ensure they receive the benefit of the twenty per cent top up

  • experiencing a delay of more than twenty days in receiving confirmation of eligibility.

If a parent has been unable to access TFC through their childcare account for technical reasons, they may be able to claim compensation.

HMRC will also consider refunding any reasonable costs directly caused by the service not working as it should, mistakes or unreasonable delays.

Guidance on GOV.UK links to an i-form that affected parents should complete to make their claim. HMRC will write to confirm if the application has been successful and if so will make a payment directly into their bank account. For more information and for details on how to apply, follow this link:

For providers, HMRC do not pay compensation for loss of time; however, if a childcare provider can evidence financial loss as a result of the technical difficulties then they can also apply for compensation.


Thirty hours free childcare

This scheme helps working parents with the cost of childcare, and provides an additional fifteen hours of free childcare on top of the fifteen hours that is currently provided universally for three- and four-year olds. Working parents of three- and four-year olds in England may be entitled to up to thirty hours of free childcare, for 38 weeks of the year (or fewer hours over more weeks).

Parents who have a child who turns three before 31 December 2017 should be applying now through the childcare service to claim thirty hours of free childcare for the spring term. Early application will ensure codes are issued in good time for next term. Not all parents can get a code straight away as HMRC sometimes needs more information to check whether a parent is eligible.

Parents can apply now at

Parents who received a code for the summer term will need to confirm their details are still correct before the January term and will receive an email or SMS message reminding them to do so. To confirm their details they will need to log on to the childcare service and follow the instructions on the ‘reconfirmation’ section of their account.

Late applications or reconfirmation made outside of the deadline run the risk of the parent missing out on eligibility and once outside of the grace period (as set by local authorities) parents will lose eligibility and, as a result, have to pay childcare providers directly.

As with the TFC service, this online offering has also experienced some issues with the application process and where affected, eligible parents have been issued with a manual code to give to their provider to ensure they do not lose their child’s place.


Looking ahead

The system was designed to make payments promptly and in line with the BACS timetable.  HMRC are the first to acknowledge that this hasn’t always been delivered, in the early stages of rollout; and where extreme delays are being experienced, HMRC have been making payments by CHAPS.

Looking ahead, and following feedback from stakeholders, HMRC are currently scoping the possibility of using faster payments for TFC. They will feed back to us the results of that work.


Over to you

As ever the policy team are keen to hear about your experiences with the roll out of the childcare service – whether that be: as a payroll professional working with employees who are exiting their employer supported childcare scheme; as a parent who has experience of opening their childcare service account and making payments in to and out of the service; or, indeed, as a childcare provider or provider of early years education. Let us know your experience by emailing us at [email protected].


To view all articles from this issue of the magazine please click here

*content correct at time of publishing