Elimination of tax relief on childcare vouchers

More than 340,000 families are members of child voucher schemes, which allow parents to sacrifice up to £243 of their gross salary, in return for electronic vouchers that are paid to registered child carers. This can mean a saving of up to £2400 a year via tax relief on the cost of childcare.

The government intends to scrap tax exemptions on childcare vouchers from April 2011, a prospect which has led more than 75,000 people to sign a petition on the Downing Street website asking the government to re-think the issue.

So what might this mean for the average working parent? The loss of tax relief may mean that companies withdraw the scheme altogether. This could result in an additional £2400 outlay for a working family which previously benefited from tax relief. For some families, this may result in one parent having to reduce their working hours or even leave work altogether in order to replace the childcare that they can no longer afford.

Abolition of the tax relief attributed to the scheme may also affect employers themselves.  Due to the cost of administering the scheme, it is thought that many employers will withdraw the scheme entirely. This may deprive the employer of a valuable recruitment and retention tool, which is one of the most sought after employee benefits.

Furthermore, employers should be prepared for an increased demand for flexible working hours, which allow an employee to meet childcare responsibilities that may previously have been met by, for example, a childminder. Employers are obliged to consider such requests from eligible employees (including those with children up to the age of 16 or 18 if the child is disabled).

Are you a working parent? Would abolition of your child voucher scheme mean that you would need to reduce your working hours or even leave work altogether?

Are you an employer? Would the elimination of tax relief on child voucher schemes mean that you ended your child voucher scheme or would you find a way to subsidise it?