Totally confused with Tax Credits and Child care vouchers!!! Help!!!

Grolsch30

Hi,

First of all I will try and keep this short and to the point and I apologise if I drift off... but this is starting to cause me a high amount of concern.

Here we go..

Me and my wife had been awarded tax credits of £280 per month with a backdated payment of around £934.Based on previous years earnings when my wife was on maternity leave.
We have an 18 month old son and our combined annual earning before tax is rounded up £38k, this tax year as my wife is back at work now.

Now all of our nursery fees of £525 per month went via my wifes work child care voucher scheme.

So we were getting £280 per month in tax credits and the full £525 in nursey fees going through child care vouchers.

Now here is where it starts,

Our nursey fees went up so our monthly bill is now £598.
We informed the tax credits department of this and also my wife asked her employer to change her payroll accordingly.

Yesterday my wife was informed that her employer had made a mistake and that they could only process £490 worth of the nursery fees because otherwise she would go below the minimum wage.
She could not even have the option to allow this to happen because we would be better off that all the fees go via her employer because the nurseryhave a special agreement with her employer whereby we save more money than if my employers child care vouchers were used.

Anyway.... we now have to fund the extra £108 via my employers child care voucher scheme.

I went on their website and found this:


Working Tax Credit? Child Tax Credit? Childcare Vouchers?
Which is the best option? Does one affect the other?
Your family will generally be better off accepting Childcare Vouchers in return for a salary sacrifice if you can answer "yes" to one of the following*:

• Your eligible childcare costs are more than £175 per week if you have one child or £300 per week if you have two or more children. In this case you will always be better off accepting Childcare Vouchers to cover your childcare costs above these limits.
• You are receiving tax credits at the family element (£545 per year, or £1090 per year if you have a baby aged under one) or less and you are claiming for your childcare costs.

Your family will generally be worse off or, at best, no better off accepting Childcare Vouchers in return for a salary sacrifice if you can answer "yes" to both of the following:

• You are receiving tax credits of more than £545 per year (or £1090 per year if you have a baby aged under one) and you are claiming for your childcare costs.
• Your eligible childcare costs are no more than £175 per week if you have one child or £300 per week if you have two or more children.

* Source: HM Revenue & Customs

If one member of a couple works less than 16 hours a week, they will not qualify for the childcare element of Working Tax Credit and will therefore be better off with Childcare Vouchers.
Childcare Vouchers are exempt from Tax and NI up to a limit of £55 per week. Employers could save around £350 per year for each employee choosing Childcare Vouchers whilst employees could save between £915 and £1195 per year.

Now according to the above statement our elegible child care costs are not more than £175 (our are £138) and we are receiving over £ 545 per year in tax credits.

Does this mean we have been paid to much tax credits and/or not allowed to have both tax credits & child care vouchers.

I really do not have a clue anymore what we are entitled to and will be phoning the tax credit people up about this but I would very much appreciate any advice insight anyone can give me.

I hope I have managed to make the above clear as I am quite worked up and worried that I now owe money back to the tax credit people!!!

Many thanks,

[Deleted User]

You can claim help towards childcare through Tax Credits OR you can use the childcare vouchers scheme.

You cannot declare childcare costs to TCO as you are already getting tax relief when buying the vouchers and also when declaring your income to TCO you should deduct the amount you pay towards the childcare vouchers from your P60 figure.

If you have been doing both you should inform TCO as you may have been overpaid.

ifonlyitwaseasier

actually you can use both, but you do need clarification form the tax credits people as some people are better off with just one or the other.

i used to work for a childcare voucher company.

[Deleted User]

You cannot claim help towards the costs and use childcare vouchers for the same costs.

If you have costs of £100 p/w and pay £50 p/w of the costs with vouchers, you can declare the other £50 to TCO.

You cannot claim to be paying £100 p/w to TCO if you're paying the £100 p/w in vouchers as you have a tax break and you are not declaring this £100 as income on the annual declaration form.

ifonlyitwaseasier

you CAN claim childcare vouchers for the tax free amount and claim TC for the rest of it!

some of the people i worked with did this and they were not penalised and found it helped them manage.

[Deleted User]

ifonlyitwaseasier wrote: »

you CAN claim childcare vouchers for the tax free amount and claim TC for the rest of it!

some of the people i worked with did this and they were not penalised and found it helped them manage.

This is what I said - you can claim help towards the amount not covered by the vouchers.

But you would not declare the full amount, including the amount paid by vouchers, to TCO.

Icequeen1

I found something similar and posted about the pitfalls of this a while back.

As Subsonicoyote has said - you cannot claim childcare vouchers and claim tax credits for the same childcare.

The tax credit claim form notes say you are not to include in the childcare amount you put on your form any amount you receive in the form of childcare vouchers.

How much of the £138 per week did you put down on the form?

http://www.litrg.org.uk/news/index.cfm?id=599

IQ

Grolsch30

Icequeen1 wrote: »

I found something similar and posted about the pitfalls of this a while back.

As Subsonicoyote has said - you cannot claim childcare vouchers and claim tax credits for the same childcare.

The tax credit claim form notes say you are not to include in the childcare amount you put on your form any amount you receive in the form of childcare vouchers.

How much of the £138 per week did you put down on the form?

http://www.litrg.org.uk/news/index.cfm?id=599

IQ

Well this is it we put the full amount down!

This Issue only came to light when my wifes employers had an audit and found out that due to my wife's wage they could not process the full amount via the child care voucher scheme as she would then go below the minimum wage.
They will now only allow £490 a month to go through her employers scheme which leaves £108 left which we will just have to pay without any discounts or vouchers.

Will the tax credits find out about this via our P60?
I know I will have to phone them and tell them about this mess but i'm trying t first figure out how to kinda explain it if you know what I mean as I scared I'll be clobbered with repayments!!!

Many thanks

mitchaa

Something is not right here.

The maximum allowable to go through a salary sacrafice is £243pm (Per parent)
How can your wife be getting tax breaks on childcare vouchers for £490?

http://www.hmrc.gov.uk/childcare/childcare-vouchers.htm

(The rates are current)

What you should be doing is...

Claiming £243pm from your wifes salary as a salary sacrafice (Cost of £167.67 to her off her net wage)

The remainder = £598-£243 = £355

This is the figure that should be declared to tax credits

You can use both as above but not 100% of them both.

Additionaly i believe you are commiting fraud (although unintentional) as you appear to be getting additional tax credits to go towards childcare.

Grolsch30

mitchaa wrote: »

Something is not right here.

The maximum allowable to go through a salary sacrafice is £243pm (Per parent)

http://www.hmrc.gov.uk/childcare/childcare-vouchers.htm

How can your wife be getting tax breaks on childcare vouchers for £490?

Hi,

well my wifes employers (the police), have some kind of special deal with the nursery which lets us have the full amount (well no £490 due to her earnings it could be the full £598 if she earnt more but if they take the full £598 out off her payroll before tax & NS then she will be under the minimum wage which they cannot do, hence they will now only process £490 in order for her not to fall below the minimum wage).

I suppose the above will give me even more headaches with the tax credits people!!!

Hope i've not confused anyone like i do myself

mitchaa

Grolsch30 wrote: »

Hi,

well my wifes employers (the police), have some kind of special deal with the nursery which lets us have the full amount (well no £490 due to her earnings it could be the full £598 if she earnt more but if they take the full £598 out off her payroll before tax & NS then she will be under the minimum wage which they cannot do, hence they will now only process £490 in order for her not to fall below the minimum wage).

I suppose the above will give me even more headaches with the tax credits people!!!

Hope i've not confused anyone like i do myself

In that case, you should only be declaring £108 costs.

However £108 costs will not warrant a childcare TC award with a £38k income.

If i were you, i would stop claiming childcare from TC as it is going to come back and bite you in the ar*e at some point.