HMRC is preparing to take action against the misuse of a childcare scheme. The tax authority has noticed that some businesses aren't adhering to the scheme's guidelines.
HMRC to Scrutinize Businesses Using Unapproved Childcare Intermediaries
Certain businesses have been using intermediaries to secure childcare options that don't meet with the government standards, but HMRC will scrutinize employers who might have improperly used a government benefit to cut childcare costs for employees.
Businesses that enrol in the childcare scheme are required to offer a workplace nursery for parents either at their location or through an external agreement with a childcare provider.
Despite these requirements, some businesses are engaging intermediaries to arrange childcare places with providers in ways that do not meet the scheme's compliance standards.
Employers Warned of Potential Tax Liabilities Over Childcare Schemes
Employers are required to be “wholly or partly responsible for the financing and managing of the provision” of childcare to be eligible for the benefit. Susan Ball, employer tax partner at RSM UK, stated: “If a nursery scheme should have been taxable and the employer has not declared this as a benefit in kind, on their P11D form or via payroll, HMRC can go back up to six years to check whether tax exemption has been claimed when it shouldn’t have been.
“There may be interest and penalties going back several years, so the impact of this could be significant for many. This has implications for employees too, who will not be happy if they are landed with an unexpected tax bill because their employer doesn’t pick up the liability.”
Ms Ball went on to say: “Employers who offer such schemes should act now to review their position. Those that have incorrectly claimed the tax exemption should make a voluntary disclosure to HMRC as soon as possible. The new Labour government may want to consider what additional support they could offer to parents.
“One option could be reopening the childcare voucher scheme to new applicants, which could be done fairly rapidly if they wanted to. Any support with childcare costs does enable people to get back into work or increase their hours which would boost productivity, a key aim of this government.”
