Changes to Employer Supported Childcare

Posted: 19th February 2011

Employers who offer childcare support to employees are reminded that from 6 April 2011, changes are being made to Employer Supported Childcare (ESC).
Under the current ESC arrangements, employees on higher earnings receive a greater tax saving than those who pay tax at the basic rate. After 6 April, only basic rate tax relief will be available to new joiners of an ESC scheme.
Employers will be required to carry out an estimate of basic earnings for any employee who joins an ESC scheme on or after 6 April 2011, in order to calculate the amount of exempt income (in the form of childcare vouchers or directly contracted childcare) that the employee can receive. Thereafter, an assessment must be completed annually at the beginning of the tax year. The assessment remains valid for the whole of the tax year. A record of how the figure is calculated must be kept and made available for inspection by HM Revenue and Customs (HMRC) if requested. There is no need to carry out a basic earnings assessment for those already participating in the scheme on or before 5 April 2011.
There are no changes to workplace nurseries schemes.
For advice on this matter, please contact us.