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Government surprises employers with u-turn on childcare policy

Jeff Fox
children's

The Government’s surprise decision to extend the salary sacrifice childcare voucher scheme (CCV) for a further six months should be welcomed by employees, but causes complexities for employers who have already initiated the changes. Article Jeff Fox, Principal – Aon Employee Benefits.

There is no clear information on the long-term future of CCV, so in Aon’s view, the Government’s announcement should be considered temporary, with an elevated chance that it will be extended further. Pressure will continue to be applied on the Government and HMRC to keep the scheme open for even longer, possibly even permanently.

Jeff Fox, principal at Aon Employee Benefits, said: “To date, the Government and HMRC have remained resolute that the policy to close the existing scheme would come into effect on 6 April, and employers and consultants have been working to this policy. However, it is welcome news that employees have the opportunity to join the current employer-provided CCV scheme for a further six months. It’s been clear that the replacement tax-free childcare scheme, intended to replace employer-sponsored childcare vouchers, has not come without challenges.”

HMRC has not yet clarified whether schemes need to remain open to retain the ‘available to all’ requirement and whether an organisation can use a closed scheme while still allowing existing members to retain their current tax privileges.

Fox added: “It is clear that many employees will be looking to their employer to offer an extended scheme, so the situation is critical. Employers should engage with their benefit providers at the earliest opportunity to consider the options. “Given the extraordinary nature of this development and the fact it creates further uncertainty for employers, we can see that many organisations will be reluctant to offer an open scheme. We hope that HMRC is supportive of organisations who take this decision and do not penalise them for making pragmatic decisions.”