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HMRC Tax-Free Childcare blunder

In August 2017 HM Revenue & Customs (HMRC) announced they would compensate parents for the website failures previously experienced when using their new online Tax-Free Childcare service.

The new Tax-Free Childcare service was launched in April 2017 but since this time many users have been encountering problems which have prevented some from being able to make a claim.  Reported problems include an inability to verify details of parents or their children, or salary information, and in some cases parents have been locked out of their account all together.  To make matters worse, the helpline for the service also encountered ‘technical difficulties’.

HMRC state that they have now made significant improvements to their website and will continue to make updates to ensure everyone can easily update their account.  As a result of the difficulties to date, thousands of parents who have experienced problems may now be able to make a claim for compensation if they can evidence the following:

  • they have been unable to complete an application for Tax-Free Childcare
  • they have been unable to access their account
  • they have not received a decision about their eligibility within 20 days

To make a claim parents need to complete an online form detailing:

  • their full name
  • their home address
  • their National Insurance number
  • a description of the issues faced
  • their bank details
  • copies of receipts for payments to their childcare provider

Once all this information is sent to HMRC a decision will be made as to whether the individual is eligible and if so, a successful claim will be raised with a payment to their bank account.

So what is the new scheme and is it worth all the hassle?

The Tax-Free Childcare scheme enables parents to receive a Government top-up of £2 for every £8 that they pay into their Tax-Free Childcare account, with a maximum top-up of £2,000 per child, per year.

To be eligible you must be a working parent, earning at least £120 a week and not more than £100,000 per annum. You must have one or more children under the age of 12 (or under the age of 17 if the child has disabilities).  The new scheme is not provided via employers, so is open to both employed and self-employed parents.

In addition, this month sees the introduction of the new 30 hours of free childcare offer, for parents of three and four year olds. Anyone who hasn’t been able to complete an online application for the free 30 hours should contact HMRC on 0300 123 4097 for a code.  Once this has been obtained you will need to provide this directly to your childcare provider to secure the free 30 hours.

What about the old Employer Supported Childcare scheme?

Previously tax relief for childcare could be provided by an employer, either by Employer Supported Childcare, or the provision of childcare vouchers. These schemes will remain open to new entrants until April 2018.  Parents already registered for either of these options can choose to continue with the existing scheme for as long as the employer continues to offer it.

Whether it is worth making the switch to the new Tax-Free Childcare scheme will depend on individual circumstances and the taxpayer’s marginal rate of tax. It will be necessary to crunch the numbers to ensure the maximum amount of tax relief is obtained.

At David Allen our team of experts are here to help. If you have any queries regarding the Tax-Free Childcare scheme contact us today on 01228 711888 to discuss the options available to you.

Posted: September 27th, 2017