Please find our frequently asked questions and answers here.
What are childcare vouchers?
Childcare vouchers are simply a different way of paying for childcare. The Government allows working parents to benefit from Income Tax and National Insurance (NI) exemptions on up to £243 per month when used to pay for qualifying childcare. Childcare vouchers are an employer-supported benefit, so can only be accessed via your employer.
£243 is the maximum available. Limits apply at various income thresholds.
What is salary sacrifice?
Most employers operate their scheme as a salary sacrifice arrangement, whereby you agree (through a change to your contractual terms) to a reduction in your salary in return for the equivalent value of childcare vouchers. Your employer must be able to demonstrate that the contractual right to cash pay has been reduced, so it is important that your employer holds a copy of any Amendment to Contract documents associated with the scheme.
Will I need to amend my conditions of contract?
Yes. You are agreeing to a contractual reduction to your salary (in return for an equivalent value of childcare vouchers) by completing and submitting the Amendment to Contract (ATC). This document must be received by your employer BEFORE they can make any reduction to your salary.
The Co-operative Flexible Benefits system automatically generates this form when you register on-line, which you need to print off, sign and return to your employer as a record of the agreement in accordance with HMRC guidelines.
Any subsequent change to this amount, or request to withdraw from the scheme must be recorded as a further ATC for the salary sacrifice to be deemed effective.
How does the Co-operative Flexible Benefits scheme work?
The easiest way is to register online where you are required to complete an electronic form and print off the agreement which must be signed and returned to your employer as proof of agreement to reduce your salary in return for childcare vouchers.
If accepted onto the scheme before payroll cut off, your employer will add you to their next voucher order. At this point, a welcome pack will be sent to you with login details and instructions for how to access your on-line voucher account.
Once voucher funds have been credited to your account, you can make ad hoc payments to your childcare provider(s), or set up a standing order for regular transactions, just like online banking.
How much could I save?
You will not pay tax or NI contributions on the value of childcare vouchers you opt for, up to the maximum of £243* per month. The benefit is per tax payer, so if you and your partner are both members of childcare voucher schemes, you could double your savings!
The value of vouchers you are entitled to claim will depend on your earnings. Your employer is required to carry out a Basic Earnings Assessment to determine the value of vouchers to which each you are entitled; that voucher entitlement will then apply for the whole of that tax year.
The following table illustrates the maximum value of childcare vouchers you can receive as exempt income, following completion of a Basic Earnings Assessment:
You can opt for less than this amount, but no more than this amount.
How does my childcare provider get paid?
We initiate payment to your childcare provider(s) on the same day for instructions received by midday, Monday to Friday. This transaction takes 2-3 working days to clear through the banking system, after which the funds will be deposited directly into your childcare provider’s bank account. Remittance advice notes are emailed (or posted) to your childcare provider on the day that the transaction is processed.
What if I don’t have access to a computer?
Our freephone Helpdesk is available on 0800 458 7929 where our customer service team can answer your queries or make payments for you 8.30am to 5.30pm Monday to Friday. Outside of these hours, messages can be left on our ansaphone – we will respond by 10am the next working day.
Can my partner also join the scheme and make savings?
The tax and NI exemptions apply per tax-payer, so both men and women are eligible. If your spouse/partner works also for an employer who offers childcare vouchers, then you could both opt for the maximum and double your savings.
Does my child qualify?
Childcare vouchers can be used to pay for the care of any child for whom you have parental responsibility, up to the 1st September after his or her 15th birthday (or 16th birthday if the child is disabled). This does not require the child to live with you.
What is qualifying childcare?
In order to qualify for the Income Tax and National Insurance exemption available through the childcare voucher scheme, you MUST use a form of qualifying childcare. Qualifying childcare in England (variations to this definition exist for childcare providers in Scotland, Wales & Northern Ireland) is defined as:
- A childcare provider registered by Ofsted*
- A school (under certain conditions)
- A domiciliary worker or nurse from a registered agency
Please visit http://www.hmrc.gov.uk/leaflets/ir115.pdf for the full HMRC definition.
*Most common forms of childcare are registered with Ofsted eg. nurseries, childminders, out of school clubs and holiday play schemes. You are advised to check with your childcare provider that they are registered before you join the scheme.
How much will it cost me to participate in the scheme?
There are no costs to you or your childcare provider for participating in the scheme.
What support is available if I have a query?
Our freephone Helpdesk is available on 0800 458 7929 or via email firstname.lastname@example.org our customer service team answers queries 8.30am to 5.30pm Monday to Friday. Outside of these hours, messages can be left on our ansaphone – we will respond by 10am the next working day.
Do I receive paper vouchers?
As part of The Midcounties Co-operative, we consider our impact on the environment throughout our business activities. Reducing our carbon footprint and using less paper is a very simple way of making a difference. We have therefore chosen to operate our scheme electronically – apart from the initial pack sent to you and your childcare provider when you first register with us, we rarely send out anything by post.
What happens if I go on Maternity/Adoption Leave?
You are legally entitled to a total of 52 weeks Maternity/Adoption Leave. If you are eligible for Statutory Maternity/Adoption Pay (SMP/SAP), it is paid for up to 39 weeks. SMP/SAP is 90% of Average Weekly Earnings for the first 6 weeks, then £128.73 per week (rate from 3 April 2011) for the next 33 weeks. The remaining 13 weeks of Maternity/Adoption Leave are unpaid.
SMP/SAP is calculated on your average weekly earnings, so participating in any salary sacrifice scheme will reduce the amount of SMP/SAP due, but in most cases the benefits of remaining in the scheme outweigh the reduction in SMP/SAP. You should seek further advice if you are in any doubt.
As with other non-cash benefits, if you are already in receipt of childcare vouchers you are entitled to continue receiving them throughout your Maternity/Adoption Leave. Statutory Maternity/Adoption Pay cannot be sacrificed, so where you have insufficient salary to make the salary sacrifice, your employer must fund the vouchers at the same level you were receiving before you went on Maternity/Adoption Leave.
Are all childcare providers obliged to accept childcare vouchers?
Your childcare provider is not obliged to accept childcare vouchers as payment, but the majority do as there is no cost to them, and the payments are made directly into their bank accounts.
How easy is it to join the scheme?
The easiest way is to register online where you will need to complete an electronic form and print off the agreement which must be signed and returned to your employer as proof of agreement to reduce your salary in return for childcare vouchers. If you don’t have access to the internet, please call our freephone helpline on 0800 458 7929 and a member of our Helpdesk team will register you over the phone.
What forms of childcare are NOT eligible to receive payment in childcare vouchers?
Any childcare provider that is not registered is not considered ‘qualifying childcare’ for the purposes of childcare voucher payments or claiming tax credits eg. care provided in the home by a relative is not qualifying childcare.
What if I use a workplace nursery?
You do not have to pay any tax or NI on fees for a qualifying child at childcare facilities provided by your employer at your place of work, or at more suitable premises elsewhere, subject to certain conditions, so you will not need to claim childcare vouchers. You may however still choose to receive childcare vouchers to pay another childcare provider.
Can I receive childcare vouchers in addition to salary?
Some employers do offer childcare vouchers in addition to salary, but it is more usual for them be available as a salary sacrifice arrangement.
What is the maximum value of vouchers I can receive?
There is no limit to the value of childcare vouchers you can receive, but you will only receive tax and NI benefit on the first £243* if paid monthly.
Can I withdraw the balance of my voucher account if my childcare requirements cease?
There is no obligation for your employer to agree to childcare voucher refunds. Childcare vouchers are a non-cash benefit and HMRC advises that they should only be refunded in exceptional circumstances, at the discretion of your employer. Any refunds authorised by your employer must be made through payroll so that the appropriate tax and NI deductions can be made.
Will childcare vouchers affect other benefits, tax credits, pensions or statutory payments?
Statutory payments are calculated on actual salary, so if you opt for a reduced salary in return for an equivalent value of childcare vouchers, any statutory payments will be calculated on the reduced salary figure. You should therefore take this into consideration when deciding whether childcare vouchers are the best option for you. The Tax Credits Helpline is 0845 300 3900.
What if I only work part-time?
Exactly the same rules apply, however salary sacrifice schemes are not permitted to reduce your salary below National Minimum Wage.
Can I still receive childcare vouchers if I only need holiday childcare?
Childcare vouchers do not expire, so you can use them as a way of saving during the year for periods of increased childcare expense, such as summer holidays.
How easy is it to change the amount of childcare vouchers I receive?
We recommend that you calculate your annual childcare costs, and divide by 12 (or 13 if you’re paid 4 weekly) to arrive at an average monthly amount. This will save you having to make frequent changes, as every time a change is made, you will be required to sign a further agreement for the change of amount.
Your employer will have their own scheme rules to determine how frequently, or under what circumstances they allow you to make changes, so please check your own employer’s Childcare Vouchers Policy for your local arrangements.
How do I change my address or personal details?
You will need to contact the customer service team on 0800 458 7929 so that they can ask some security questions prior to making changes to your records.
*Based on a Basic Rate Taxpayer
For more information contact our helpdesk on 0800 458 7929