Following the well-publicised Astra Zeneca case that went through the European Court of Justice in July 2010, HMRC issued guidance on how VAT should be applied to salary sacrifice schemes.

We covered the ruling and HMRC’s initial guidance in our blog post ‘ECJ Ruling does not apply to childcare vouchers’ on 11 August 2010.

HMRC issued further information in 2011 which expanded on the initial guidance and stated that new VAT treatment must be taken into account from 1^st January 2012 – you can read the full guidance notes here.

No doubt you have sought the proper advice in the run up to this deadline and are clear on your requirements but as there has been considerable commentary on how childcare vouchers are affected by this ruling I wanted to be clear on what the guidance is and who you can contact for help.

Section 4.3 of the HMRC’s guidance relates to childcare vouchers and states that:

“Childcare vouchers are not directly affected by the judgment as they are not subject to VAT.

However, employers that incur administrative fees from their voucher provider have, to date, been permitted to recover VAT on those fees as a general business overhead. However, because the fees are directly attributable to the exempt supply of vouchers the normal partial exemption rules must be applied with the result that the VAT incurred may no longer be fully recoverable.

Affected businesses should apply this treatment from 1 January 2012.”

Source: HMRC Revenue & Customs Brief 28/11

It is worth stressing, as the guidance states, that VAT may not be fully recoverable, suggesting that a portion of it may still be recovered and that this change will not affect all employers offering a scheme. If you’re in any way unsure of how this will affect you then we’d urge you to contact HMRC for clarification.

This ruling does not affect parents; they will continue to receive childcare vouchers as before.

There was some good news for parents in the Chancellor’s autumn statement, with a number of measures being introduced to help the most disadvantaged children.

Chancellor George Osborne announced that the provision of early year’s childcare is to be extended to an extra 130,000 disadvantaged two year olds. This is part of the Government’s targets to tackle the long term causes of child poverty, by enhancing early development for disadvantaged children.

The Government plans to invest a further £380 million a year by 2014-15 to extend its offer of 15 hours of free education and care a week for disadvantaged two year olds – effectively doubling the number of children who will receive free nursery care.

This means that 40% of two year olds – 260,000 children – from the most disadvantaged families will now get support in their early years.

While we welcome these changes and the positive effect they will have for a number of families, we feel there is still more which can be done to support working parents.

For families facing increasing bills, stagnant salaries and rising childcare costs, childcare vouchers continue to play a vital role and we believe the scheme could be adapted to provider even greater support.

Over the coming months we will be looking at other opportunities for the scheme – including ways for vouchers to be made available for the self-employed.

One thing is clear, with childcare costs estimated to increase dramatically over the next few years the savings available through the childcare voucher scheme will prove more important than ever.

Research published today by the Social Market Foundation shows that as a result of growing childcare costs and reduced Government support, working parents are set to pay more from their own pockets to cover childcare costs.

The research is supported by The Childcare Voucher Providers Association (CVPA), of which CVS is a founder member.

Key findings show that:

• Low income families in 2015 are likely to pay £600 per year more for their childcare compared to 2006 – almost 7% of their annual income:
• a middle-income family in 2015 is likely to pay £900 per year more; and
• a higher-income family in 2015 is likely to pay £1,400 per year more.
• If childcare costs continue to rise at the current rate, the cost of a typical amount of childcare will be £104 per week in today’s money; a 13.5% rise from 2006.

Ultimately, this means that if we’re to return to the public support levels offered in 2006, the high point for childcare support, the following measures need to be taken:

• The proportion of childcare costs covered in the new Universal Credit would have to increase to 83% (from the current 70%)
• The childcare voucher entitlement for basic rate tax payers would need to increase to £83 per week – it’s currently £55 per week, which has remained unchanged since 2006.

The report clearly demonstrates the consequences if funding continues to drop whilst costs rise. As part of the CVPA we’re committed to promoting the role childcare vouchers can play in offsetting the costs parents are faced with – it’s not just childcare they have to pay for after all and easing that burden will help elsewhere and hopefully help them return to work.

The report will be formally launched today where the SMF will present their findings to members of parliament and civil servants in order to raise awareness of the issues and highlight potential solutions. 

I’ll be at the event to represent the CVPA and give the introduction to the session. I’m looking forward to being able to talk about the relevance of childcare vouchers in helping parents meet their childcare demands and how we move forward to ensure parents are not simply priced out of childcare.

You can read the SMF’s report ‘The Parent Trap’ here.

With soaring inflation and utility bills you may think Christmas cheer would be the last thing on parents’ minds, but it seems spending on presents for the kids is one thing Mums and Dads are just not willing to compromise on.

We asked over 1000 parents how much they plan to spend on presents for their children this Christmas and found that despite increasing financial pressures, 16% expected to spend over £300 in total on their kids’ presents this year. A further 19% said they’d shell out between £200-£300 and 5% are planning to spend over £500!

Christmas can be tough on the family bank balance, but even when budgets are squeezed parents still want to provide all they can for their children, the important thing is not to be left having to pay the price for Christmases past.

I read a recent survey by HSBC which showed 21% of parents will be borrowing money to pay for presents, while others will be relying on their overdraft, payday loans, personal loans and borrowing from friends and family.

If you’re a parent, then make sure you’re making the most of all financial schemes and benefits you are entitled to, such as childcare vouchers, which can save a huge amount to be able to add to the Christmas present fund. If you’d like more information on childcare vouchers and the savings you can make, visit our website.

Also, consider other ways you can make savings this time of year. We’ve put together some simple ideas of fun ways for families to save some pennies and have a ‘home-made’ Christmas this year.

CVS’ tips for ‘making’ this Christmas the best ever:

Spending less can often mean giving more, especially when it comes to presents for relatives such as grandparents. Here are some ideas for ‘making’ Christmas:

• Get handy – Handmade Christmas cards are fun and easy to make, highly personal and will always be well received. One idea to try with the children is to create a design using an upside down hand print to become Santa’s face and beard. Stick on eyes and add rosy cheeks to bring extra charm to the design.

• Get cooking – Stained glass window biscuits make a beautiful and edible Christmas tree decoration. Use seasonal biscuit cutters to create trees, stars, bells and present shaped biscuits then cut out an identical shape in the centre of each biscuit and pop in a boiled sweet before putting in the oven. Remember to make a small hole at the top of each biscuit so you can thread ribbon through for hanging, then bake and decorate with icing.

• Get foraging – Pinecones can make a festive and charming decoration. They are versatile and can be painted and hung on the tree or around the home. Place in silver bowls/cups/candlesticks and top with glitter covered cardboard stars as tabletops; or even use them to decorate the cheese board and fruit bowl.

• Get snappy – Collect together photographs from Christmases past and from members of the family. See how far back you can go by involving grandparents, and see what precious stories and anecdotes can be uncovered along the way. Copy the images and use them to make unique place settings or gift tags.

Last month, six members of staff set off for Mt. Snowdon in their bid to raise £750 for our charitable partner, The Honeypot Children’s Charity. Michelle Lloyd tells us how they got on.

Our alarms were set for 5:00am on the Saturday morning so we were ready to leave Lichfield at 6:00am and start the long journey to Snowdon.

As the sun started to come up en-route the weather looked promising – clear blue skies, a few clouds and the sun was shining. Even when we hit Wales the weather held up and our spirits were high. However, as Snowdonia Park appeared on the horizon our spirits were soon dampened by the dark low clouds covering them and all we could do was hope that the sun would break through as the morning went on.

We got to the foot of Mt Snowdon at 8:45am and, within 10 minutes of being out of the car, were soaking wet and being battered by the wind. Unfortunately we had a little wait for one of our team members who got held up in traffic. When we finally set off at 10:00am, we looked like we’d walked up and down the mountain once already!

We set off at a quick pace to try and make up some time; persevering whilst the wind and rain tried to push us back. The walk was hard and after just over a mile, the blustery conditions started to aggravate my asthma. I was struggling to breathe and having to continuously take my inhaler. I tried to continue with Mandi and Keeshak helping me but it soon became clear to me and the rest of the team that I wasn’t going to be able to continue without putting myself at risk. I sadly took the decision to turn back and waved goodbye to the others as I headed back down.

However, Ellen, Mandi, Keeshak, Louise and David continued on their walk, braving the elements and determined to make it the top.

The rain, wind and cloud cover made it really difficult for them to see where they were going and at one point they missed the path and went off route! This meant they were faced with an almost vertical climb to get themselves back on track. Determined not to be defeated they started to pull themselves up the mountain by scrambling back up to the path. The climb was tough and defeated two more of the team who had to turn back, dismayed at having got so close.

This left just Ellen, Mandi and Keeshak to complete the challenge, would they complete it? Could they continue to fight the elements which had only got worse the higher they got?

With great determination and team spirit, the three remaining team members made it to the top in just under three hours. They took a few photos at the top and warmed up with a well deserved hot drink in the café before heading back down.

By the time we met up again in the car park the weather had vastly improved – it’s always the way when walking in the hills! We congratulated the team on a job well done, said our goodbyes and headed home to a nice warm bath!

All in all, the climb was hard, harder than any of us anticipated and the weather was against us from the beginning but three of the team made it to the top and we managed to raise a fantastic £805 The Honeypot Children’s Charity.

Would we do it again? Yes of course! Some of us have refused to be beaten and would love to attempt the climb again next year in the summer months – maybe taking a different path and sticking to it this time!