Tax break offers big savings for working parents:

As of April 2005 parents will be able to get some financial support to help pay for nannies, Children’s Minister Margaret Hodge announced at the annual Sure Start Conference on Wednesday December 8 2004.

Under the Childcare Approval Scheme there will be two types of financial support available; employer-supported childcare vouchers and working tax credits:

1. Childcare Vouchers.

These are exempt from National Insurance Contributions (NICs) so they can help save money on childcare costs.

Families whose combined family income exceeds £59.00 can use employer-supported childcare vouchers, which will exempt parents from paying tax and NI on the first £50 per week they spend on childcare.

From April 6th 2005 Childcare Vouchers will become tax and NI exempt for £50.00 per week, which will provide huge savings for working parents who use childcare. With the introduction of the light-touch nanny registration scheme, parents who employ an approved nanny will also able to take advantage of these savings.

Working parents will save over £800.00 per year if they elect to take £50.00 per week with Childcare Vouchers and are a standard rate tax payer. If they are a higher rate tax payer they will save over £1000 per year.

How to take advantage of these savings?

• A working parent would firstly need to get their employer to sign up to a Childcare Voucher scheme and pay a fee for the service provide to the organisation administrating the scheme.
  
• They will then supply vouchers directly to the parent who can use them to pay their nanny or other childcare provider.
  
• The Nanny or Au pair will then redeem the value of the voucher from the Voucher Company, usually by direct payment into their bank accounts.
  
• Childcare Vouchers are usually offered as a salary sacrifice scheme. This means that a specific amount of the salary is converted into Childcare Vouchers.

The contract between employer and employee will need to be updated or a signed agreement included within it reflecting the salary sacrifice agreement. This should make clear the reduction salary agreed, the length of the agreement and the amount to be received in vouchers.

Childcare Vouchers can be used to pay for any form of childcare as long as it's legally registered or approved. This can include not only nannies, but also nurseries, childminders, playgroups, out of school clubs and creches.

All approved nannies or Au pairs can receive payment and reimbursements for Childcare Vouchers, providing they have a bank account.

Nanny will need to register her details with the Childcare Vouchers Company.

Information regarding this can be obtained from: Accor Services: 0845 33 04406

www.childcarevouchers.co.uk, e-mail: cc@accorservices.co.uk

Cash payments : This payment can alternatively be made into your own bank account via your employer’ Company. Your employer can request the Childcare Voucher Company to transfer the money into the employers company account and the employer will then transfer this to your own personal account.

2. A new tax exemption for all income types from April 2005.

Families with a combined family income below £59.00 can also use childcare vouchers but will also be eligible for working tax credit support for childcare in their own home.

Parents on the lowest incomes will receive the most with support tapering off towards the higher end of the scale. The financial support will cover 70% of childcare costs of up to £175.00 per week for parents with one child to £300.00 for families with two or more children. This will increase in April 2006 to cover 80% of childcare costs.

The scheme is entirely voluntary but in order for parents to benefit nanny needs to be approved and fulfil certain criteria. She needs to provide evidence that she:

• Has a childcare qualification or has attended an induction course, which is deemed appropriate. An up to date list of all acceptable childcare qualifications and suitable induction courses will be available on the DfES Qualifications website.
  
• Has a valid paediatric first aid certificate
  
• Has an enhanced CRB (Criminal Records Bureau) check including a POCA (Protection of Children’s Act) list check. The childcare approval body will then assess whether the CRB disclosure or entries on the POCA list contain information which would make the applicant unsuitable to work with children.

The approvals scheme is only available in England. This means that nannies working in Wales or Scotland for example will not be eligible. Nanny must also be aged 18 or over.

Nestor Primecare Service Ltd has been appointed as the approvals body. They will start accepting applicants from January 4th; the approval will come into effect on April 6th and will last for 12 months.

All applications receive between January 4th and April 6th will have a common starting date of April 6th.

Registration will last for 12 months. The registration fee is £96.00 per year and includes the cost of an enhanced CRB disclosure.

Even if a nanny or an au pair already has a CRB check in place they will have to have another one done in order to be approved and registered. This must be done every year in order for a nanny or au pair to be re approved. The cost of a first aid certificate and the induction course in childcare, if she does not hold any professional qualifications, will be in addition to the £96.00 paid to register.

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