22nd September 2015

Jonathan Brothers

Switch Accounting Ltd

Ferry House, Canute Road

Ocean Village


SO14 3FJ

Tax Free Childcare Update

Dear Jonathan,

This month’s tax update has a distinctly back to school feel about it because I’d like to answer one of the most frequent questions we get asked about whether your business can pay for childcare costs.

This simple answer is yes; childcare costs up to this value can indeed by paid for by your business:

  • In order to get the benefit you must be trading as a limited company and receiving a salary

  • If your partner is receiving a wage through your company, then each of you will be able to claim

  • You must make sure that the child carer is registered. Broadly, this means that a nursery must be Ofsted approved or a carer must be registered with the local authority

  • You can search for registered child carers at:

  • The allowance can either be taken as vouchers (subject to a small admin charge) or the payment can be made directly to the child carer / nursery

  • If you have other employees they have the option of taking child care vouchers in lieu of salary, which saves the employer’s NI at 13.8% of the payment

  • Claiming does not affect entitlement to the 15 hours of free childcare per week that the government is providing to two, three and four year olds.

Next steps:

  1. Have a record of details of the child (e.g. name, date of birth, childcare provider).

  2. Make sure your childcare provider is registered. This can be a copy of the Ofsted report for a nursery or details of the local authority registration for the carer.

  3. Write a company memo for your files stating that you are starting a scheme and it is available to all employees. It is best to do this even if you are the only employee to show you have complied with the rules.

  4. If vouchers are not required write a letter to the childcare provider telling them that your company will be contributing to payments.

  5. Make the payments using a Standing Order on the company account

Please let me know if I can be of any further help.

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