Childcare scheme saving 40% on nursery fees

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Mini Me
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Childcare scheme saving 40% on nursery fees

Postby Mini Me » Thu Aug 18, 2016 2:24 pm

Hello!
Our company called Mini Me Inspire operates an HMRC regulated scheme for working parents to save approximately 40% on their nursery fees.
Our Mini Me Inspire scheme is unlimited, to cover working parents' full nursery fees. This gives parents huge savings and can be used in addition to childcare vouchers (which your Employer may already operate) to cover the remaining amount of a parent's nursery fees, or Mini Me Inspire can be used to cover a parent's full nursery fees. Mini Me Inspire is an exceptional scheme and is focused purely on making nursery fees affordable to parents. Our scheme is available to working parents across the UK.
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Mini Me
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Re: Childcare scheme saving 40% on nursery fees

Postby Mini Me » Fri Aug 19, 2016 11:01 am

It is a tax scheme that is regulated by the HMRC and is fully compliant with legislation. Sorry to hear you have had a bad experience with another scheme.
Our calculation is not offered by any other childcare scheme provider, so it is unique and we ensure that parents/employees receive 100% of the benefits they are entitled to.
Our calculation works on the parent's individual nursery fee, therefore the parent's savings are individual to them. A parent may only require nursery savings for a year, or they may require it for three or four years. We work to the parent's circumstances, which is what makes our scheme unique.
There is an additional contribution amount that the nursery receives from the Employer and we do also receive a fee from the Employer, but that is the nature of our business.
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Earlsfield mummy
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Re: Childcare scheme saving 40% on nursery fees

Postby Earlsfield mummy » Mon Aug 22, 2016 7:42 am

Seems to me this is legal at the moment. Employers are allowed to use salary sacrifice schemes (which saves the tax rate of the employee) when providing work place childcare. We used to get this when my son when to a work place based nursery provided by my husband's employer.

HOWEVER as any tax lawyer knows, as soon as concessions and loopholes are perceived as being abused by HMRC, they legislate to close it down.

This scheme is clearly a bit artificial. HMRC's intention behind the scheme is to allow big employers such as universities, NHS trusts to provide a nursery at work. This is being twisted to basically pretend that a nursery set up privately is being 'provided' by an employer. If there was a significant take up, HMRC would close it down.

Whatever you think about the morality of avoiding tax if it is perfectly legal to do so, the British view of using tax schemes has changed. This scheme might work for a bit but I would be skeptical of its medium term future and if I was an employer or nursery I wouldn't touch it. The risk is that it's expensive to set up then in a short period of time it gets shut down as an option and there is bad PR.
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Scottov
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Re: Childcare scheme saving 40% on nursery fees

Postby Scottov » Mon Aug 22, 2016 8:55 am

I'm not aware that childcare is an eligible salary sacrifice, so I'd be very curious how this scheme is meant to work.

perhaps in 50 words or so, you can explain how a non-approved salary sacrifice scheme will work as an effective salary sacrifice and what warranties/indemnities you offer?
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Scottov
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Re: Childcare scheme saving 40% on nursery fees

Postby Scottov » Mon Aug 22, 2016 9:00 am

Earlsfield mummy wrote:Seems to me this is legal at the moment. Employers are allowed to use salary sacrifice schemes (which saves the tax rate of the employee) when providing work place childcare. We used to get this when my son when to a work place based nursery provided by my husband's employer.

HOWEVER as any tax lawyer knows, as soon as concessions and loopholes are perceived as being abused by HMRC, they legislate to close it down.

This scheme is clearly a bit artificial. HMRC's intention behind the scheme is to allow big employers such as universities, NHS trusts to provide a nursery at work. This is being twisted to basically pretend that a nursery set up privately is being 'provided' by an employer. If there was a significant take up, HMRC would close it down.

Whatever you think about the morality of avoiding tax if it is perfectly legal to do so, the British view of using tax schemes has changed. This scheme might work for a bit but I would be skeptical of its medium term future and if I was an employer or nursery I wouldn't touch it. The risk is that it's expensive to set up then in a short period of time it gets shut down as an option and there is bad PR.
Good post.

If that's the lurk, trying to exploit workplace provision I can't see how that is scalable. They can't do that in every workplace?

You are correct however that it is transparently artificial, and would, in your scenario, presumably require consent of the workplace - not something I'd be confident of getting
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Mini Me
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Re: Childcare scheme saving 40% on nursery fees

Postby Mini Me » Wed Aug 24, 2016 5:41 pm

Hi,

The scheme that we offer has 2 aspects to it:

1. The salary sacrifice element which is where the parent agrees to the salary sacrifice. We send them a calculation of savings based on their nursery fees. The salary sacrifice amount must not take the employee's salary below National Minimum Wage. Once the parent has received the calculation and has agreed it then this is the documentary evidence for the Employer that the employee is agreeing to vary the Contract of Employment by taking the salary sacrifice as the per signed calculation. This is an agreement between the Employee and the Employer.

2. Once the parent has signed the calculation, the Employer will then sign a Mini Me Inspire Agreement agreeing that they will pay the nursery fees directly to the Nursery on the first of each month. This is an agreement between the Employer and the Nursery.

The salary sacrifice is effective as the Agreement is for 12 months, and the employee agrees to the salary sacrifice. The HMRC state that the salary sacrifice must not take their salary below National Minimum Wage. The Agreement can be renewed for another 12 months if the parent chooses to.

Some childcare vouchers are also offered through a salary sacrifice, however the legislation that our scheme works to allows the full nursery fees to be covered rather than just the capped amount that the childcare vouchers legislation allows.

Our scheme is effective as the salary sacrifice is not applied retrospectively. It is applied from the commencement date of the Mini Me Inspire Agreement. The Employer pays the nursery fees as of the commencement date of the Mini Me Inspire Agreement.
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Scottov
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Re: Childcare scheme saving 40% on nursery fees

Postby Scottov » Wed Aug 24, 2016 6:11 pm

and HMRC have ok'd your scheme?

All employers are required to write to HMRC to seek approval for such schemes, via the relevant compliance office - what response has been given?

Childcare fees have not typically been considered an eligible sacrifice.

the minimum wage has nothing to do with it, if the sacrifice is not eligible. in that situation every £1 you sacrifice will be replaced by a benefit in kind taxable at your marginal rate of £1
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Mini Me
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Re: Childcare scheme saving 40% on nursery fees

Postby Mini Me » Fri Aug 26, 2016 6:25 pm

Hi,

HMRC are aware of our scheme and we do have the HMRC backing. The government published a consultation paper on 10th August 2016, which reviewed several Benefit In Kind salary sacrifice schemes. The government said the following regarding childcare schemes:

At Budget 2016, the government announced it was considering limiting the range of BiKs [Benefits in Kind] that attract income tax and NICs advantages when they are provided as part of salary sacrifice schemes. The announcement was clear that employer-supported childcare and the cycle to work scheme should continue to benefit from income tax and NICs relief when provided through salary sacrifice arrangements. These are benefits that the government specifically wants to encourage employers to provide.

As announced at Budget, following any change, certain exempt BiKs would
retain their existing tax treatment under Part 4 ITEPA with the same treatment for Class 1A NICs. These are:
•The exemptions for childcare vouchers in Chapter 6 at sections 270A to 270B
as long as the conditions in sections 318B to 318D were met;
•The exemptions for employer-supported childcare in Chapter 11 – section 318 and sections 318A to 318AA as long as the conditions in sections 318B to 318D were met;
•The exemption for cycles and cyclist’s safety equipment in section 244


Our scheme is a tax-exempt scheme, which is in accordance with the legislation that governs our scheme. Therefore, the salary sacrifice amount is fully exempt on tax and national insurance. Employers can request HMRC approval, and we do inform the Employer on the guidance for how this can be sought. The reason for HMRC approval is to ensure that the correct amount of tax is being paid, as a result of the Employee's salary sacrifice. It is not a legal requirement but some Employer's do seek HMRC approval for reassurance that they are paying the correct amount of tax.

The National Minimum Wage rule is a condition that the government states is required for all childcare salary sacrifice schemes. We inform parents of this requirement as our calculation works on the parent's nursery fees, we do not ask them for details of their salary. Therefore, the parent must confirm that the salary sacrifice amount does not take their salary below national minimum wage.
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