HMRC Guidance around Salary Sacrifice Nursery Fee Scheme update

There is a long-standing childcare tax relief that far more employers could use than currently do, and the reason they don’t often comes down to one thing: nervousness about HMRC

The relief is the Salary Sacrifice Nursery Fee scheme aka Workplace Nursery scheme. It lets working parents pay their nursery fees out of pre-tax salary, it saves the employer National Insurance too, and it has sat in the legislation since 2003. In other words, it is not new, and it is not a loophole.

So where does the nervousness come from? HMRC has published guidance over the years warning about “commercially marketed” schemes that set out to abuse the exemption. Advisers read the warnings, understandably get cautious, and that caution is fair, but it is worth understanding exactly what those warnings are.

The legislation sets two clear requirements and they are simply that: “the employer has to be wholly or partly responsible for financing and managing the provision of care”. A scheme that genuinely meets that test, and keeps the evidence to prove it, is doing exactly what the legislation requires. And it is worth remembering that the same HMRC guidance, rarely quoted, records HMRC’s own view that it believes “the majority of workplace nursery partnership schemes satisfy the requirements.” The warnings are aimed at schemes where the employer does nothing real, not at the relief itself.

That is exactly where we built Feel The Benefit, here in Manchester, to sit. A real, enduring financial contribution the employer cannot walk away from, genuine management through the employer’s own appointed agent, and the evidence to show for both. We are a cautious supplier by nature, as you can see from how we have approached the legislation and how we operate our scheme. HMRC has looked at schemes run exactly this way and the exemption has stood, and we carry a million pounds of professional indemnity behind our work.

We have drafted two rafts of information for you to consider, the first being around the legislation itself: https://www.feelthebenefit.co.uk/news/workplace-nursery-hmrc-evidence/ and then the second is looking at the HMRC guidance notes that have been issued since the legislation and how we answer each and every point they raise: https://www.feelthebenefit.co.uk/workplace-nursery-hmrc-guidance/

If your compliance checks have made you shy away from the Salary Sacrifice Nursery Fee scheme in the past, then it may be worth a considered second look, with the full guidance and the legislation side by side.

Run your own numbers at feelthebenefit.co.uk, or talk it through with us on 0800 888 6629.