INCOME BASED ESA AND CHILD CARE COSTS

I have a client who is a one parent family and was in part time employment. Unfortunately she does not make the national insurance contributions for SSP and had to sign on for income based ESA. Client would like to hold her child’s nursery place open for when she is fit to return to work but we have been advised as she is in receipt of income based ESA they are unable to pay child care costs with her TCs; client has been off work sick for approximately 2 months. Would someone confirm if this is correct as information system is vague. 

Thanking you
Philly

Was she getting WTC with a childcare element before she was signed off? As I see it, you can continue to qualify for WTC for 28 weeks of being signed off work, provided you were working sufficient hours to qualify before you became ill. I can’t see anything saying that the childcare element is treated differently just due to being off work sick. However, this is after a cursory glance at CPAG.

Are you sure she is not entitled to SSP? If she was working 16 hrs at the higher rate of NMW, this would exceed the lower earnings limit, which means although she doesn’t pay NIC, she should be treated as having paid it, which should allow her to get SSP, provided she’s been working and earning at least this for the last 8 weeks prior to the last pay day.

I hope this makes sense. Someone else may have more time to check the rules on whether childcare costs stop when ESA starts. As I say, I couldn’t find anything to that effect.

Thank you very much for your input Edmund.  Contacted TCs again and asked where did they source their information or reason for nonpayment of child care costs whilst in receipt of income based ESA?  They have now confirmed she has entitlement for these costs for 28 weeks…

Great news, I’m glad you got a positive outcome.

There may be a problem.  The childcare element is part of Working Tax Credit, and WTC counts as income for income-based ESA.

Not an actual problem.

It is the very fact of claiming ESA and receiving NI credits (assuming no SSP entitlement) that allows a person to be ‘treated as’ being in full time work for the purposes of WTC during the first 6 months of illness. So yes, a person will not (generally) receive any income related ESA because the WTC that they will continue to receive will (generally) exceed their applicable amount for ESA.

Seems to me the potential issue here is that actual WTC should have continued in payment, not just the child care element…...

You have thought of the same problem that I did.  If she has to use her tax credits for living expenses, because her income-related ESA has stopped, she may not be able to afford to pay for her childcare…

I agree that she would continue to count as working for tax credits purposes.