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Government announces employer-supported childcare reforms



The Government has today announced, in the Pre-Budget report, that the tax and National Insurance treatment of employer-supported childcare will be reformed from April 2005, with draft legislation expected in January 2004.

Chancellor, Gordon Brown said: “For every employee whatever their income level, employers will be able – as long as the offer is made to every employee – to provide – free of both employee national insurance and income tax and free of employer national insurance – £50 a week for approved childcare.”

The new arrangements will add to the existing tax and National Insurance exemption on workplace nurseries, encouraging employers to help their staff to meet the cost of “good quality” childcare. Employers will be able to contract direct with a nursery, childminder or after-school club on behalf of their staff.

Currently, employees are exempt from both tax and National Insurance when an employer provides a place in a nursery that they wholly or partially fund and manage. The announcement extends the tax and National Insurance exemption to the direct provision of childcare (employer-contracted childcare) and childcare vouchers.

  • To qualify for the exemption employers will have to ensure that where childcare schemes operate they are generally accessible to all staff.

  • The childcare used must be either registered childcare or approved home childcare.

    Commenting on the announcement of the changes, the Paymaster General Dawn Primarolo said: “Employers have a very important role to play in helping parents to balance work and family life and particularly in helping parents to meet their childcare needs. We are committed to supporting them in this.”

    Kevin Curran, General Secretary of the GMB, Britain’s General Union, reacted to the pre-budget Report saying: “The Chancellor has focussed on issues at the heart of working communities in particular skills and childcare. Investment in these areas will make the UK stronger and healthier for the long term. The GMB will encourage every workplace to take up the tax free opportunities in child care being offered.”

    Alison Cantle, Childcare Director of childcare voucher
    suppliers Sodexho PASS, said: “Schemes can be up and running in 6 weeks, and are fully administered by voucher companies like ourselves, so there is no longer an excuse NOT to put childcare on the agenda.”

    Related items

    Childcare tax breaks anticipated in pre-budget report

    HR Zone members have already been sharing advice on setting up childcare voucher schemes.

    Feature article: Workplace childcare

    Employers of the Year 2003 were praised for their childcare initiatives.

    The Inland Revenue and HM Treasury held a formal consultation on new proposals to expand employer support for childcare earlier this year. View the report of the responses to consultation

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