Lovewell’s logic: Is government backtracking on tax-free childcare?

Debbie Lovewell-Tuck

On Tuesday (13 March), the government announced that it is to delay the closure of workplace childcare voucher schemes by six months, extending the April deadline for employees to sign up to a scheme.

Since it was announced that childcare vouchers would be phased out to make way for the government’s tax-free childcare initiative, which came into effect in April 2017, this has been a contentious issue.

Research published by Jelf Employee Benefits in December 2017, for example, found that 82% of employer respondents would like to see the deadline for joining childcare voucher schemes extended beyond April 2018. Just 8% said they would not be in favour of such an extension.

A petition to keep the childcare voucher scheme open, meanwhile, received around 119,000 signatures.

Under the new tax-free childcare policy, parents of children under the age of 12 are provided with up to £2,000 per child per year, while parents of disabled children qualify for up to £4,000 per child per year.

Unsurprisingly, Tuesday’s announcement was widely applauded.

However, I did receive an interesting email from Aon Employee Benefits, which made me stop to think. This raised the point that, despite it welcoming the change, given next month’s previous deadline, many employers will have already taken action to communicate the change to employees and taken steps to close their childcare voucher schemes. This creates added complexities for employers and greater uncertainty as to the longevity of the benefit for employees.

In addition, as the industry continues to apply pressure to the government, could this result in the scheme remaining open even longer?

But, what is the answer? Should the government reverse its decision and allow childcare voucher schemes and its tax-free childcare initiative to run in tandem?

Or, if it is set upon moving away from childcare vouchers, should it stick firm to its decision rather than adding further delays?

One thing is certain, this is a highly emotive issue, which will no doubt be further debated throughout the industry in the months to come.

Debbie Lovewell-Tuck
Tweet: @DebbieLovewell