LITRG continues to see people who have swapped salary for childcare vouchers when they should not have done.

We think HMRC could do a lot more to make things clearer.

Our latest article at

www.litrg.org.uk/news/index.cfm?id=599

explains why.

We'd be interested to hear of others who have come across problems.

A client approached the bureau recently as she had been told she had an overpayment of tax credits. This had been caused, she was told, by her failure to tell the Inland Revenue that she was claiming childcare vouchers from her employer. The client was quite unaware that this affected her entitlement and it was only when she was specifically asked on the phone this year about vouchers that she confirmed she claimed them.

The bureau wrote in on her behalf to challenge this decision saying she had kept the Inland Revenue up to date at all times with her situation -- she'd had 2 children in the last 3 years and periods of SMP and periods of extended unpaid maternity leave -- and would have certainly told them about the vouchers if she'd been asked. The reply, which arrived yesterday, has so many confusing issues:-

They photocopied notes which were included with the original form and these state 'only include childcare costs you actually pay yourself' followed by 'do not include any amounts paid by your employer' And this is meant to show her where she went wrong! As it happened, with this client, and many others, she was not claiming vouchers at the time she filled in this form and has never completed another one. All subsequent dealings having been by phone.

They also state in the letter that they do not feel she met all of her responsibilities because she did not tell them about the childcare vouchers she received from her employer. The next sentence says 'As a result, you incorrectly included the amount of chldcare paid via your employer as vouchers'. This makes no sense.

How do you suggest we proceed, please? We do feel this client has acted fairly at all times and should not have to repay this £600 approx.

By coincidence we posted a new article on our website today about childcare vouchers pleading for a greater understanding of this complex issue. You can find it here: http://www.litrg.org.uk/news/index.cfm?id=777.

In your case there are three guilty parties and one innocent. The guilty ones are:

1. The voucher companies who have sold their products with scant regard for ensuring that their ultimate customers would benefit from what they would "buy" (there are some notable exceptions).

2. The employers who instituted schemes without understanding how the tax credit rules worked and just relied on voucher companies sales pitches (and an NIC saving for themselves).

3. HMRC who have consistently failed over the last few years to explain in their literature the key elements of childcare voucher risks and also failed to ask the voucher companies (despite being asked to do so) to put prominent explanations of key issues in their literature.

I think there is a case to be made that in a practical, rather than a legal sense, your client fulfilled her obligations and could not expect to have done better in the light of the failures of the other three parties.

If you'd like to see if we could help then please contact me via the contact page of our website.