Tax-Free Childcare

The planned abolition of the childcare vouchers scheme for new claimants has been deferred for 6 months.

It was announced in George Osborne’s last Budget two years ago that the Childcare Vouchers scheme would be replaced with Tax-Free Childcare. The two have similar goals, but radically different structures which have created winners and losers. The then Chancellor said that the new scheme would replace the voucher system (technically “Employer-supported Childcare”) from April 2018, although pre-existing claims would continue to be met.

HMRC started to roll out the new scheme in April 2017 and immediately ran into complaints about its Childcare website, eventually forcing the government to make nearly £1m of payments in lieu to parents. After this somewhat inauspicious start, the scheme was gradually put in place, with all working parents with a youngest child under the age of 12 becoming eligible on 14 February 2018. With that point reached, it looked as if the closure of the voucher scheme was on course for the end of the tax year.

It was therefore something of a surprise that in a debate on Universal Credit on 13 March (Spring Statement day), the education secretary, Damian Hinds, revealed that “we will be able to keep the voucher scheme open to new entrants for a further six months”. The news came in a response to a question from a DUP MP, following a cross-party letter to the Chancellor asking for the voucher scheme to be kept open.

The HMRC childcare choices website now says that the voucher scheme will “remain open to new joiners until October 2018”. However, as many employers have been working to a 5 April deadline for closure, there may be problems for employees making fresh claims in 2018/19, only to find the scheme has closed, as planned.

This is not HMRC’s finest hour and, given the timing of the announcement, the phrase “a good day for burying bad news” does spring (sic) to mind.