DAWN PRIMAROLO LAUNCHES CONSULTATION ON INCENTIVES TO BOOST EMPLOYER-SUPPORTED CHILDCARE

New improved tax and NICs incentives will enable employers to play their part in meeting the childcare needs of all their employees, Paymaster General Dawn Primarolo said today.

The proposals mark another step towards achieving the Government’s vision of every parent being to find affordable, good quality childcare.

Launching the consultation document, Dawn Primarolo said:

“The Government is determined to help parents to balance their work and family life. Employers have a very important role to play in helping their staff to achieve a balance and particularly in helping parents meet their childcare needs. We are committed to supporting them in this and today’s proposals will help to ensure that more parents than ever before have access to affordable, good quality childcare."

Stephen Burke, Director of the Daycare Trust welcomed the consultation saying:

"We welcome this review of tax incentives for employer supported childcare. It's an opportunity to encourage employers to do more for working parents, particularly those on lower and middle incomes. The current arrangements need to be enhanced so that more employees benefit from help with childcare provided by employers. Beyond that, the review can examine how best to enable employers to fulfil their corporate social responsibility. More help with childcare will mean a better work-life balance for parents and a better start in life for their children."

The key proposals in the consultation paper are:

expanding the workplace nurseries tax exemption to include all forms of registered childcare, including approved home childcare;
simplifying the requirements for the tax exemption to make it easier for employers to qualify by removing the condition for the employer to have management responsibility of the provision;
introducing a new tax exemption for childcare vouchers (that are currently only exempt from NICs);
introducing a financial limit for the tax and NICs exemption on all formal childcare provision (other than workplace nurseries) and childcare vouchers; and
ensuring that where schemes are offered, childcare support is available to the whole workforce.

Dawn Primarolo was speaking at the Royal London Hospital’s workplace nursery, a model example of how an NHS employer can help its employees with their childcare needs. Rachel Elu, a nurse and mother of two young children who are cared for by the nursery, said:

“Having a nursery on site has been extremely helpful to me. It has made working full time possible, given me peace of mind and with the help of Working Families Tax Credit, has made it financially possible.”

Another working mother, nurse Jane Latchford, said:

“Without Fee Direct childcare would be too expensive and I wouldn’t be able to return to work.”

Paul White, Chief Executive, Barts and the London NHS Trust said:

"We have made great efforts in this Trust to enable staff to balance family with work commitments. We currently provide 64 nursery spaces at the Royal London Hospital and we are opening a new nursery at Barts next month for a further 43 children. We offer more than many other employers do as we subsidise nursery places using the employers' NICs savings we make to benefit parents on lower incomes."

Praising what the Trust has done Dawn Primarolo said:

“This nursery is an excellent example of an employer helping staff meet their childcare needs and provides first-rate support to vital public sector workers.”

DETAIL

Currently employees are exempt from tax on the benefit of a place in a nursery provided by the employer. If the nursery is not on the employer’s own premises the employer is required to be wholly or partly responsible for both the financing and management of the nursery.

Widening the workplace nurseries exemption to cover all forms of registered and approved home childcare would enable parents the choice of good quality childcare that best suits their needs, for example registered nurseries, childminders, after-school clubs and approved home childcare. The extension could particularly help parents such as those who commute or work shifts, and parents of school-age children or disabled children.

Employer-provided childcare vouchers are free from employers’ and employees’ Class 1 NICs. They can be used for any form of childcare and to any amount. A new matching tax exemption for childcare vouchers is proposed to provide consistent treatment of employer-support for childcare to help parents to choose the best form of good quality childcare that meets their needs without being influenced by differing tax treatment.

A financial limit of £50 per week is proposed for the extended tax exemptions on formal childcare provision (other than workplace nurseries) and childcare vouchers to ensure that they are affordable and fairly targeted.

NOTES FOR EDITORS

1. The Chancellor, Gordon Brown announced in the pre-Budget Report in November 2002, that the Government would consider reforms, including new tax and National Insurance incentives to expand employer supported childcare.

2. The joint Treasury and DTI paper “Balancing work and family life: enhancing choice and support for parents”, published on 14 January 2003, set out the Government’s strategy for supporting parents and sought views on next steps that included improving the tax and NICs exemptions on employer supported childcare, including how they could offer a better incentive to employers to support childcare provision.

3. The consultation period will end on 31 May 2003. The Government will consider the consultation findings and plan to provide an update by the pre-Budget report.

4. This press release and the consultation document are available on both the HM Treasury website and the Inland Revenue website.

5. The document “Balancing work and family life: enhancing choice and support for parents” is available on the HM Treasury website.

6. The Inland Revenue today published guidance on salary sacrifice arrangements, also known as “fee direct”. This guidance is available on the Inland Revenue website.

7. Media enquires should be directed to:

HM Treasury press office: 020 7270 5238
Non-media enquiries: 0207 270 4558

Inland Revenue press office: 020 7438 6692
Non-media enquiries: 0207 944 3000

Press Notices index 2003 January to June