Removal of tax breaks undermines childcare voucher
schemes

Four in five payroll professionals do not think
organisations will continue running childcare voucher schemes after tax
exemptions are abolished, according to research by the Institute of Payroll
Professionals (IPP).

The UK’s leading membership body for payroll
professionals carried out a survey amongst its members asking their opinions on
the government’s intention to scrap tax exemptions on childcare vouchers from
April 2011. Unsurprisingly, 78 percent of IPP members also said they are
against the withdrawal of tax relief on childcare vouchers. There is a worry
that removing tax exemptions will encourage some mothers to stay at home and
not go back to work after having children.

The findings support the
IPP’s stance that employers may no longer see the financial value of retaining
a childcare voucher scheme if they do not benefit from tax breaks since
administration costs are usually paid for by savings on National Insurance.

Karen
Thomson, Associate Director of Policy, Research and Strategic Visibility of the
IPP, said: “We asked our membership to voice their opinions over the
elimination of tax relief on childcare vouchers and we received an overwhelming
response confirming our belief that this plan
would influence a company’s decision on whether to maintain the scheme.

“The reality is that many
organisations will not see the advantage in offering the scheme as it will just
incur costs to operate and be a further burden to the payroll department. “In
response to these survey results, the IPP Policy & Research team will be
writing to the Treasury on behalf of our membership and will publish the
outcome shortly.”

13 November 2009