The government intends to introduce legislation in the next parliament that will retrospectively relax the ‘generally available’ conditions applicable to tax exemptions on childcare vouchers and employer-contracted childcare.

This measure is intended to clarify the position of employers with employees on or near to the national minimum wage.

The amendment in the Budget, which is backdated to 2005/06, means the exclusion of employees earning at the national minimum wage level will not prevent the childcare voucher scheme being available.

Tim Stovold, a partner at accountancy firm Kingston Smith, said: “The childcare voucher scheme has proved immensely popular since it was first introduced, with many employers adopting these as part of a salary sacrifice arrangement with their employees. Less popular, but still very tax efficient, is a similar relief for childcare where the employer directly contracts with the provider.

“In the 2010 Budget there have been some relaxations to the conditions for these tax reliefs to apply. The relevant condition which has been amended is the requirement that employers offer the childcare voucher scheme to all employees, but this was not possible where employees were earning at the level of the national minimum wage as they are not able to ‘sacrifice’ their salary so that they earn below this level."

Read more articles on childcare vouchers.