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"Ed Balls' reply to my Childcare agitation. Suggestions needed." blog discussion

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  • As an employer promoting childcare vouchers as a benefit I was upset to learn that one of our employees was losing out by opting to use childcare vouchers. The majority of staff do benefit from it and I did not want to make an issue in case people withdraw. I, therefore, asked our provider to give me a guide as to who it would not benefit and was given this response;
    'I can confirm that the savings vary between tax credits and childcare vouchers parents can receive both at times but this needs to be confirmed by the tax credits. '
    Most helpful. So basically the childcare department will send you to tax credits and tax credits will send you to childcare vouchers department.
    It is complex but more should be done to ensure tax credits are investigated prior to allowing a person to opt for vouchers.
  • I have just read the blog, and am horrified that I may have been caught out by this, I am so scared I am at my wits end with worry.
    My employers operate what they call a Flex benefits scheme, where you are awarded a Flex Fund from which you can buy certain benefits, some of the fund is allocated to mandatory insurances etc, and the rest, makes up what you get in your pay packet.
    As I use childcare, I elect to buy childcare vouchers out of my flex fund, which get credited to an account run by a company called Care-4, then I use this money to pay for childcare, I know my employers also contribute an amount, which is why it’s a benefit, I suppose.
    I also have been receiving tax credits, but it would seem I should not have been, although I don’t understand why. I spend the money out of my pay to get the vouchers, the vouchers go to an account, I use account to pay the Childcare bill, and then the Tax credit people reimburse me for what I have to pay out.
    The Inland Revenue keep talking about a Salary Sacrifice, and the blog suggests it not my money paying the childcare, which it is. I have been doing this for many years, being completely unaware that what I am paying, is not considered me paying.
    I don’t know what to do now, my circumstances are complicated by
    1) I was divorced 4 years ago, so my status with the Tax Credit people was reassessed (I am scared they will chase me for money from when I was still married, and our income etc was different).
    2) Over time my child care costs have reduced as Nursery Fees became After School Club fees, and two children in child care became 1 in child care, with the other only requiring it on an Ad hoc basis. I can elect at anytime to change the amount taken out of my Flex Fund and paid into the Care-4 account accordingly, and the amount has not necessarily reflected the amount I have to pay each month, which varies anyway. – I didn’t realise this mattered, as it was useful to accrue a little extra to pay for school holidays, and currently I have a largish credit in the account, as I didn’t need as much for Holiday this year as I thought. I have today ask my employers to stop paying anymore, so from next month my salary will reflect this but going up by the difference.
    3) The fact that the first £243 paid is exempt from Tax and National Insurance, applicable from some x point in time, then before that, I don’t know what it was, and has it been different before that?
    4) Prior to the Care-4 schemem there was a scheme which sent out paper vouchers in £10 denominations, which I purchased to cover most of the childcare fee.
    Where does all this leave me? I envisage having to pay back thousands of pounds. I am a single woman with two children and I don’t have that sort of money. The Tax people what me to send documentation to their Physical Change of Circumstances team in Liverpool, but in spite of two phone calls I am still confused at what to send.
    The first advisor said send a covering letter along with 1) The Contract Variation between Myself and Care-4. After to talking with both the Flex Benefits department within my company and Care-4, nobody is clear on what that actually is. 2) My Contract of Employment. 3) Payslip from before I started in the scheme and 1 from afterwards (not sure which scheme, but how can this be relevant for so many years)
    The second advisor said to send a covering letter with 1) just my current payslip showing the amount of tax deducted or not deducted for the childcare vouchers. My payslip doesn’t itemise this element, and only gives a flex fund figure which may include other things. 2) My Flex Fund contract.
    Years ago, after I had my first child, we were had for an overpayment and ended up getting nothing for well over a year, ( it was all to do with the year I was on maternity leave and not getting my normal pay, and then going back to work at the wrong time (it would seem)) When I became divorced I was so scared of it happening again, I thought I went over everything with fine tooth comb, even under claiming to ensure I couldn’t be paid too much ever again. Now this has happened, and I really wish I never signed up for tax credits ever. It is the most stressful, distressing, and complicated system ever, which scares me every time I have to deal with it.
    Sorry for the big ramble, but I think my situation reflects what was said in the blog, I may be getting a bit of benefit from using the voucher scheme, but I am still paying for most of the childcare myself, and the way I see it, I should therefore should be getting the tax credit to reimburse this.
  • Use the link to 'hmrc.gov.uk/calcs/ccin' on page 1 of this thread! (I'm new and apparently not allowed to post with proper links, sorry). I've just tried it, and it was not too complex, and confirmed my suspicions that I was losing out

    I have just spent the last 3 days trying to understand how tax credits are worked out, after realising that I seemed to be receiving less by having vouchers. Tonight I found Martin's article and this thread. I have now tried out this calculator above (which google never found for me) and it confirms I am £330 pa worse off!
    I have cancelled my vouchers this morning, and now need to tackle the tax credit people, who I also think have reassessed me incorrectly for last year and are claiming back more than they should.

    I am particularly annoyed, as like other people, I requested vouchers at work and was really pleased when the scheme was introduced last year. I thought it was saving me money, and am astounded that the government can be running schemes to make us worse off!

    When I joined the voucher scheme, it was not made clear that my tax credits would be affected.

    How many people must there be out there who are still not aware that they are losing out?

    Martin - we need a simple system, and one where people do not lose out by taking up an opportunity to apparently save money!

    Good luck!
  • Lu_T
    Lu_T Posts: 906 Forumite
    I live in Ed Ball's constituency and work for a government agency. I buy childcare vouchers through Accor via my pay packet. At no point did anybody - my HR people or the people from Accor - supply me with any information about my options for claiming either childcare vouchers or the childcare element of child tax credit.

    I've just given birth to our second child and will be on maternity leave until April 2010. This reduces our income by around £10k this financial year, but we get nothing extra from the tax credits people.

    Our joint income is around £43k so we aren't badly off by most people's standards, but losing that amount of money will make this next year hard work.

    On the plus side, as I buy the vouchers from my pay packet they are classed as a benefit and, due to a recent EU ruling, my employer has to maintain this benefit so will pay for the vouchers while I'm on statutory maternity pay. This amounts to around £140 per month for about three months. Not much, but every little helps.

    Once again we have a series of conflicting and overlapping systems which just proves how left-hand, right-hand our current civil service is. I say this as a civil servant who comes across trivial examples of this pretty much every day!

    Good on you Martin for championing yet another important cause. :T
    MSE Parent Club Member #1
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    Imogen born Boxing Day 2006
    Alex born 13 July 2009
  • richoneday
    richoneday Posts: 134 Forumite
    Hi Martin
    This may be a step too far but what about the inconsistencies in types of childcare that qualify for vouchers and tax credits. My daughter is about to go to boarding school. Under amendments to the Income Tax (Qualifying childcare) regulations 2008 I can now use vouchers to pay for (some of) the after school/boarding element (NOT the school tuition fees) but tax credits tell me that I can't claim it as childcare. A crazy mixed up system! These are both Government systems and they need to be brought into line so that no one loses out. As a self-employed person I find that the whole ax credit system is flawed anyway as it isn't able to be responsive to my changing income.
  • Weedy
    Weedy Posts: 6 Forumite
    Part of the Furniture Combo Breaker
    Hi
    Has there been any further developments on this issue?

    In 2010/11 our joint income was around £32k as I was on maternity leave, and am receiving some childcare tax credits now. This year I've been working part time and our joint income is expected to be £45k. However, when it comes to income the tax credit people seem to take off pension contributions for some pension schemes, which brings us hovering round £42k, which is at the very top of the £10k threshold that they allow as income disregard.

    I am in that dilemma of whether for the rest of this tax year it would be better that we switched to childcare vouchers (ditching the tax credits) to hopefully avoid any situation of being overpaid as it would be a real struggle to pay it back. The salary sacrifice would also bring our joint income down a bit to hopefully stay within the £10k income disregard.

    The complexity of how these schemes overlap (or don't) is outrageous. Particularly that if consequently the tax credit people say we wouldn't have been overpaid, we can't retrospectively change things if we've committed to having childcare vouchers, or vice versa. If we've not taken childcare vouchers, thinking tax credits is our best option, then we find out it isn't, we can't go back and rectify it with childcare vouchers.

    It's not so much an issue when you fall clearly under £XXk or clearly over £XXk but if you hover around the £40k and sometimes have a small amount of fluctuation with overtime etc it feels impossible to make an informed choice. It feels like a gamble.

    The HMRC calculator doesn't seem to work for my situation for some reason.

    Any updates on this or advice where else I might get some help? I see someone suggested the Family Information Service, which I will give a go.

    Thanks
    Weedy
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