Childcare Grant Scheme Extended

The Childcare Business Grant Scheme (which is available only in England) has been extended to 31 December 2014. Under the scheme, grants of £250 or £500 are paid to people setting up a new childcare business (which can include childminding in the childminder’s own home). The grant can be used as a contribution towards costs such as training and registration, Disclosure and Barring Service (DBS) clearance, health checks and certificates, and public liability insurance, as well as purchasing equipment and adapting premises.

The grant for a new childminding business (one looking after a child or children, not related to the childminder, in the childminder’s own home) is £250, doubled to £500 if either there are four or more childminders working on the premises (including the proprietor) or the childminder has incurred additional expenditure in order to provide care for disabled children.

The grant for childcare businesses operating in non-domestic premises, such as nurseries and out-of-school clubs, is £500.  The scheme also includes access (free of charge) to a business mentor.

Two points to watch are that grants will not be paid to anyone already operating a childcare business of any kind, even if the money is needed to open a new nursery in new premises, and that schools may not claim a grant for breakfast clubs, after school clubs, and other childcare provided by the school on school premises.

Further information is posted at www.childcarebusinessgrants.dcms.gov.uk.

Tax free childcare

The Government has announced further details of the ‘Tax Free Childcare’ scheme, first announced in the March 2013 Budget and due to be launched in Autumn 2015. The current childcare tax reliefs - for workplace nurseries and for childcare vouchers - apply only to childcare provided, or partly paid for, by an employer. What is new about ‘Tax Free Childcare’ is that it will provide direct help with childcare costs, without involving the employer. Accordingly, it will be available without the co-operation of the employer, and to self-employed people on equal terms with employees.

How will Tax Free Childcare work?

Shortly put, the concept is that the parent(s) will open a special account with National Savings & Investments. If there is more than one qualifying child in the family, a separate account may be opened for each. Children will qualify until their twelfth birthday, or until their seventeenth, if they are disabled. It is possible that the scheme will be phased in - applying first to nurseries and playschools for very young children, and then being extended to after-school clubs, etc, for older children.

The parent(s) may pay up to £8,000 a year into each account, and for every £8 paid in, the Government will add another £2, so the overall effect is identical to giving tax relief at 20%. The parent(s) will then use the money in the account to pay their childcare provider. All payments into and out of the account will be made electronically.

There will be no additional relief for higher-rate taxpayers. Also, there will be no reduction in National Insurance contributions.

Will everyone be entitled to Tax Free Childcare?

Three groups will be excluded from the scheme:

• Tax Credit and Universal Credit claimants, who will continue to receive help with childcare costs as part of their Tax Credit claim. Universal Credit will cover 85% of childcare costs, compared with 70% for Tax Credit.
• Families which include a parent who is not earning (at least) an amount equal to eight hours a week at the National Minimum Wage (about £50 a week, at present).
• Families which include a parent with an annual income of £150,000 or more.

Once Tax Free Childcare is launched, parents already receiving childcare vouchers from their employer will be able to choose either to continue doing so, or to claim Tax Free Childcare. But the voucher scheme will close to new entrants.

However employers will be able, if they wish, to continue to operate a workplace nursery and their subsidy to the nursery will continue to be disregarded for both income tax and National Insurance purposes.