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Tax-free childcare scheme to launch in 2017

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The government is to delay introduction of the tax-free childcare (TFC) scheme until early 2017, following victory in the Supreme Court against a legal challenge to its decision to deliver childcare accounts through National Savings and Investments. The scheme, first proposed in 2013, was originally expected to launch in the autumn of 2015. The legal action was brought by a small group of childcare voucher providers involved in the delivery of the scheme that tax-free childcare will eventually replace, leading the court to place a suspension on the development of the scheme. This has prevented key delivery steps from taking place.

Damian Hinds, exchequer secretary to the treasury, said: ‘It is disappointing that some organisations involved in the existing scheme felt the need to take and persist in this costly and wasteful course of action, which has led to a delay in the launch of tax-free childcare.’

LITRG chairman, Anthony Thomas, said: ‘A legal challenge regarding whether the running of the childcare accounts should have been put out to open tender has now delayed the scheme’s implementation to 2017. Since the scheme was first announced, LITRG has raised many concerns about the interaction between TFC and other childcare schemes. The group has highlighted the difficult and complex decisions that people will face in trying to decide whether to join the TFC scheme or stay with their existing childcare support through tax credits, universal credit or childcare vouchers. People receiving TFC cannot continue to receive tax credits or universal credit. TFC will also replace the existing tax and NIC reliefs for employer-supported childcare (often referred to as childcare vouchers), although those already claiming childcare vouchers will be able to continue receiving them.

‘Under the rules as they stand, detailed guidance will be essential. But that guidance will have to be long and complex if it is to deal with the very wide range of personal and financial circumstances. The delayed roll-out of universal credit adds to the complexity. We urge the government to take the opportunity to consider the impact of TFC as drafted and to examine carefully the full range of interactions. There is an opportunity to re-examine the legislation to try and smooth some of these interactions and to make sure that detailed guidance, and supporting tools, are in place to allow individuals to make informed decisions about which scheme they should use.’

TFC is part of the government’s long term plan to support working families and will provide up to 1.8m families across the UK with up to £2,000 of childcare support per year, per child, via a new simple online system.

The existing employer-supported childcare scheme will remain open to new entrants until tax-free childcare is launched.

Issue: 1270
Categories: News