As announced in Budget 2013, the government proposes to materially revise the ‘tax free employer-supported childcare’ regime. The proposals, potentially to be phased in from Autumn 2015 would (over time) replace the existing system of tax reliefs where childcare is provided externally and funded (at least contributed in part) by an employer.

Its headline numbers suggest the new scheme will pay for 20% of up to £6,000 of childcare costs annually for each qualifying child. However employers may wish to contribute to the joint HM Treasury and HM Revenue & Customs recently announced consultation, e.g. to seek to ensure the new system does not suffer from over-complexity (for instance the Budget announcement indicated that it may be possible to elect to stay within the ‘old’ scheme). In addition the tax reliefs currently achieved by many key employees may be affected.

Some interesting observations include:

– It is understood that there are no current plans to abolish the existing (and potentially unlimited) tax relief available for employers who provide and/or manage their own workplace nurseries.

– The current ‘Working Tax Credit’ system will be changed under the new ‘Universal Credit’ regime, bringing some further complications in the interaction with ‘Tax-Free Childcare’ .

– The consultation is introduced with significant political overtones (e.g. “The Government is proud that – despite inheriting Britain’s largest post-war budget deficit from the previous Government – it is possible to take these vital steps to keep costs down for working families”) which are not normally a feature of HMT or HMRC consultations. Does this indicate some concerns over possible opposition which may be generated by the proposals now that these are open to wider public scrutiny?