Finance Bill 2011: Change to qualifying conditions for childcare vouchers

The government has confirmed the change to qualifying conditions for employers that provide childcare schemes through salary sacrifice or flexible benefits arrangements.

The legislation ensures that employers can continue to offer childcare schemes that rely on salary sacrifice arrangements without compromising tax relief for employees.

The tax exemptions and national insurance contributions (NIC) disregard for childcare vouchers only apply if a number of conditions are met, including that the scheme must be available to all employees.

Many employers currently use salary sacrifice or flexible benefits arrangements to provide access to schemes, but these arrangements cannot be applied to workers earning at or near the national minimum wage (NMW).

The legislation amends the condition to allow employers using these arrangements to make, or continue to make, their childcare schemes unavailable to those employees earning near the NMW.

The legislation will apply from the tax year 2005-2006, when tax relief for childcare vouchers and directly contracted childcare was introduced.

Amendments to provide for retrospective change to the associated NICs legislation will be made separately.

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