Recently some of our clients have been asking about Childcare Vouchers and if they are able to run these costs through their limited companies. Here is a recent question we received and our response:
Can I use my limited company to cover some of the costs of my childcare? What is the maximum amount that can be claimed as a business expense? . Also does the child minder have to be registered.
John Mumford, our Technical Director answers:
A company can claim a maximum of £243 per employee per month for childcare vouchers. If both the husband and wife are employed by the company then each can claim this amount so they would get a total of £486 tax and NI free. However, the relief you get is capped at basic rate so if the person getting the vouchers is known to be a 40% taxpayer it gets reduced to £124 per month.
To benefit from the Tax and National Insurance exemption your childcare provider must hold either a current registration certificate (with a unique reference number (URN) or an approval certificate with an expiry date and reference number.
Recognised approval organisations include:
Ofsted Childcare Register - Compulsory(England)
Ofsted Childcare Register - Voluntary (England)
Local Health and Social Services Trusts (Northern Ireland)
The Care Commission (Scotland)
Childcare Appoval Scheme (Wales)
The Care Standards Inspectorate (Wales)
If you are paying direct to a nursery then the the easiest way is to set up a formal agreement between the company and the registered nursery/childcare provider to pay up to the maximum, with an agreement that any excess is paid personally by the parent. The company then pays direct to the nursery.
Here is a Sample agreement that you can use but this should be put on company notepaper:
Henry the Cat Day Nursery
1 Nursery Hill
I agree to purchase childcare from you to the value of £243 per week from 6 July 2012. I intend to give the childcare as a benefit to my employee John Smith for use by his daughter, Jane. This agreement may be amended or cancelled if John leaves my employment.
Jones Consultancy Ltd
If you have any questions about Childcare Vouchers or would like further information please don't hesitate to contact us here at Carrington Accountancy.