Salary Sacrifice Scheme

Merracas

KiddiVouchers: does failure to follow a high-balance notification process matter when considering a refund?

My husband has an active KiddiVouchers account with an accumulated balance of approximately £17,000. The vouchers have not expired.

KiddiVouchers has said that refunds are generally discretionary and only available in exceptional circumstances. We are currently asking them to reconsider a refund.

Our concern is not simply that the balance is large. It is that the balance appears to have accumulated without the account management/notification process operating as expected.

My husband and his business partner were the only two participants in the same company KiddiVouchers scheme and were on the same arrangement. The business partner received a specific notification from KiddiVouchers warning that he had a “large balance” when his balance was £1,215. My husband did not receive a similar notification and his balance eventually reached approximately £17,000.

The relevant difference appears to be that the business partner had an email address registered, whereas my husband did not. However, as far as we can establish, an email address was not a prerequisite for joining or remaining in the scheme.

KiddiVouchers' position is that automated account updates may be sent to users with an email address and that they were under no contractual obligation to provide an alternative method of notification.

We are not arguing that my husband necessarily had a contractual right to receive an email. Our argument is that, if KiddiVouchers operated a high-balance monitoring and notification process, does an apparent failure of that process become relevant when they are exercising their discretion to decide whether the circumstances justify a refund?

In other words, is the relevant issue simply whether they had a contractual obligation to notify him, or can their actual administrative procedures and the circumstances in which the exceptional balance accumulated also be relevant to whether discretion should be exercised reasonably?

We are obtaining the original scheme documentation and have asked KiddiVouchers to explain what happened to the account as the balance increased. I'd be interested in views on how this should be approached.

Floss

Why are you accumulating a balance and not paying for childcare with them? Surely this is tax fraud if you want a refund, as the money is deducted before tax....

Woodstok2000

If this is the old voucher scheme where you could claim up to £243 a month, that equates to at least 8 years of vouchers. A refund is going to be very difficult if not impossible to process when it impacts 8 years of payroll and tax records, and depending on salary bands it could impact your husband's tax rate and entitlement to other benefits. All that would need to be managed by your husbands employer.

Regardless, I would think Kiddivouchers would argue that their system worked, but the email was not sent as tour husband did not register one. That's on him, and would not influence their liability or decision around the refund.

This may be worth a read for a similar case that went to the small claims court (and lost):

https://www.theguardian.com/money/article/2024/may/21/childcare-vouchers-firm-wont-refund-2800-accrued-since-pandemic-struck?CMP=Share_AndroidApp_Other

Woodstok2000

https://forums.moneysavingexpert.com/discussion/comment/82121311#Comment_82121311

It's absolutely not tax fraud - it's a government sanctioned voucher scheme. There is no fraud in sacrificing salary for vouchers that you then do not use.

Grumpy_chap

Perhaps Floss had understood the OP hoped to gain a refund for the full value of the vouchers as cash, not via the reverse payroll that has been detailed and is far more complicated. It might simply be impossible over the long duration that the vouchers have been accumulated as both the company and personal tax submissions would all need updating for that period.

It seems as though the KiddiVouchers provider has operated their system and would have sent the notifications to the registered e-mail address associated with the account. The failure is the OP not providing a registered e-mail address. I don't see any reason why the provider has to sent via other means if the individual has not provided an e-mail address.

Also, one has to assume that the OP knew how much was being deducted form salary and accumulating vouchers and also knew how much was being spent on childcare so, if the voucher balance was accumulating, the OP would have been able to realise that this was the case.

Why hasn't the voucher value been spent on childcare?

Can the voucher value still be spent on childcare? That seems the cleanest solution. End the ongoing SS savings and provide the childcare required form the vouchers.

KiddiVouchers: does failure to follow a high-balance notification process matter when considering a refund?

My husband has an active KiddiVouchers account with an accumulated balance of approximately £17,000. The vouchers have not expired.

KiddiVouchers has said that refunds are generally discretionary and only available in exceptional circumstances. We are currently asking them to reconsider a refund.

Our concern is not simply that the balance is large. It is that the balance appears to have accumulated without the account management/notification process operating as expected.

My husband and his business partner were the only two participants in the same company KiddiVouchers scheme and were on the same arrangement. The business partner received a specific notification from KiddiVouchers warning that he had a “large balance” when his balance was £1,215. My husband did not receive a similar notification and his balance eventually reached approximately £17,000.

The relevant difference appears to be that the business partner had an email address registered, whereas my husband did not. However, as far as we can establish, an email address was not a prerequisite for joining or remaining in the scheme.

KiddiVouchers' position is that automated account updates may be sent to users with an email address and that they were under no contractual obligation to provide an alternative method of notification.

We are not arguing that my husband necessarily had a contractual right to receive an email. Our argument is that, if KiddiVouchers operated a high-balance monitoring and notification process, does an apparent failure of that process become relevant when they are exercising their discretion to decide whether the circumstances justify a refund?

In other words, is the relevant issue simply whether they had a contractual obligation to notify him, or can their actual administrative procedures and the circumstances in which the exceptional balance accumulated also be relevant to whether discretion should be exercised reasonably?

We are obtaining the original scheme documentation and have asked KiddiVouchers to explain what happened to the account as the balance increased. I'd be interested in views on how this should be approached.

Woodstok2000

Can the voucher value still be spent on childcare? That seems the cleanest solution. End the ongoing SS savings and provide the childcare required form the vouchers.

That's definitely the best idea. Childcare vouchers are valid until 1 September after your youngest child’s 15th birthday and aren't limited just to care - they can be spent on clubs and activities, and even things like PGL adventure holidays.

UKTaxHelper

The tax side isn't the blocker here. A refund goes through payroll as pay in the month it's paid, so nobody is reopening eight years of records. It's the provider's discretion you're arguing about, not HMRC's.

Grumpy_chap

Depending on the OP's overall income level, a £17k payment in one month could be very expensive tax-wise, particularly of the resultant annual income lands in the £100k - £125k band.

I assume the OP can cease ongoing SS childcare vouchers so that should be the first step.

Then, if the refund is returned via payroll in one lump, find out whether that can be SS to pension in advance of the refund actually being processed. Obviously, using the accrued fund for childcare (against the broad definition that is permitted) would be best if still possible.

sheramber

Refunds are possible if you were unable to use the vouchers due to exceptional,unforeseen circumstances.

What are you husbands exceptional and unforeseen circumstances.

Woodstok2000

https://forums.moneysavingexpert.com/discussion/comment/82121767#Comment_82121767

That's interesting. As a thought experiment, if I have been building up a significant voucher balance with a provider who allows refunds (e.g. EdenRed), what would prevent me refunding this as a tax avoidance mechanism? e.g. I've accrued £12,000 in tax free vouchers. I am leaving my job in April, cashing in the vouchers that month would incur no tax in the current year (assuming I have no further earnings) whereas I should have paid 20% tax on that amount? Essentially that would allow anyone to move income into future years for tax reasons?

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/comment/82121877#Comment_82121877

That is probably a fairly marginal edge case.

One might expect that the majority of people with the ability to SS £12k would require a greater than £12k income in the latter year in the scenario.

A more common situation might well be an individual with a bonus pushing them above £100k in one year only using SS to reduce that year and then claiming the refund in the following year when they land in the 40% tax bracket.

It is still probably such a minority edge case that no-one will have considered it, nor would there be merit in expending resource to close it down.