Treatment of Childcare Vouchers

Hi, I’ve scoured the books, internet etc and cannot find what I’m looking for anywhere so really hope someone on here might know the magic answer!

Client is working and salary sacrifices £243 per month of her income for childcare vouchers.  Originally the LA were including the voucher amount as income (which we thought was correct) but after a lot of issues regarding treatment of her income, they have now changed their tune.

They write “The income used in the calculation of your revised housing benefit is gross income excluding the child care vouchers (salary sacrifice), minus tax, national insurance and 50% of pension which leaves a net income used for the calculation of your benefit.”  Whilst this reduces her net monthly income by £243 for calculating her award, they have now removed the childcare disregard of £190 (2 kids) per week.

Can anyone clarify how childcare vouchers should be treated (i.e. as my assumption was it was treated in full as income) and whether by claiming childcare vouchers, she would not be entitled to the childcare disregard?

Thanks, Alleycat

Thank you for your reply, it’s certainly given me some food for thought.  I assume from the first part of your post that Childcare vouchers come under the rules for non-cash vouchers?  If not, could you point me in the direction of where in the regs the treatment of vouchers is contained?

Secondly, if I could just clarify where you say in the second paragraph that “the fees are further disregarded from the claimant’s residual earnings” do you mean that claimant’s earnings for HB purposes are for example £300 minus childcare vouchers of £55 per week.  The claimant’s childcare costs for one child are £150 per week but only £55 of these costs are disregarded rather than the usual max of £175?  If so, it would mean that the claimant is actually worse off by claiming the vouchers as the savings made on tax and ni, coupled with the two lots of £55 are less the childcare disregard they could have.

Regarding the First tier Tribunal you know of, do you know if it is has been published anywhere as I’ve searched but had no luck.

Sorry, I’m really struggling to get my head around it all and am so appreciative of your help.

Really interesting thank you.  Whilst I understand that you’re not able to publish on a public forum, would you be able to tell me the date of this case so I can refer to it when next writing to the Council?

hbinfopb - 05 February 2012 12:46 PM

The Council took the view that the first £55 of the claimant’s child care fees was covered by vouchers and so she did not pay” or “incur” it herself - it was paid directly by the employer when the provider redeemed the vouchers.  The Council therefore only disregarded £95 of child care fees from the claimant’s residual earnings (which already excluded the amount of the vouchers).

Concerning the above, in this case the Authority are taking the view that the Childcare vouchers are not counted as earnings as they are Tax and NI exempt (which further reading on my part and the info you’ve provided seems to uphold) but despite the actual childcare costs exceeding £55 per week, the authority are not disregarding the amount above this.  Their argument so far is that as these vouchers are direct payment for child care there is no income disregard as the value of the vouchers are disregarded as income.

They are aware that the actual childcare costs exceed the value of the vouchers as they had previously been disregarding the full £175 and the claimant’s husband also receives childcare vouchers which are not Tax and NI exempt and therefore counted as income.

This is putting the claimant at a distinct disadvantage as if they had not decided to salary sacrifice they would have been better off as they would have had full £175 per week disregarded.

Looks like we are off to Tribunal with this case.  Should be interesting!

If you’ve any other thoughts on this case, I would be very glad of your views and/or advice.