The Low Incomes Tax Reform Group (LITRG) has urged the Government to provide greater clarity to parents on the many recent and planned changes to child support.1
The tax campaigners are concerned that the childcare support landscape has become very complex and it is difficult for parents to understand how schemes are supposed to interact, such as tax credits, the planned tax free childcare (TFC), universal credit, free childcare entitlement and childcare vouchers. The tax campaigners worry that this confusion may lead parents to make the wrong financial decisions on which support scheme or combination of schemes to use.
LITRG told the Government in its response to the Childcare free entitlement: delivery model consultation,2 that it is extremely concerned about the potential impact of an increase in minimum income limits for both the extended provision of free childcare and the delayed tax free childcare scheme, as announced in the Autumn Statement 2015.
Anthony Thomas, LITRG Chairman, said:
“Finding reliable, high quality, affordable childcare is a major concern for working families. The high costs and limited availability of childcare are two of the biggest challenges that parents face. Childcare support is currently split across different schemes, administered by different government departments and the interactions between those schemes adds to the complexity.
“It is crucial that complete guidance is available that not only explains the rules of each childcare scheme, but also gives sufficient information to help people to choose between them and make the right decision. This information should be updated as often as necessary. There should also be a dedicated phone service in place that can answer questions and provide support on the range of childcare options.
“Local authorities should also have a duty to provide this wider information and the Government should provide them with a toolkit to enable them to do so in a consistent way. Failing to provide this information could lead to parents finding themselves in overpayment situations with HMRC or DWP or they could make poor financial decisions and be worse off because of them.”
LITRG is concerned at how the increase in minimum income limits for both the extended provision of free childcare and the delayed TFC scheme will impact on parents who are self-employed and those who are employed on zero-hours contracts. While parents who are paid a higher hourly rate may indeed qualify for support by working a low number of hours per week, those who earn national minimum wage or national living wage will effectively have to work more hours to qualify for the same type of support - but those extra hours may not be available to them.
Anthony Thomas said:
“We are very concerned at the potential unfairness of the increases in minimum income limits on those with low incomes and these ought to be addressed in order to be fair to everyone.”
LITRG said it is wholly supportive of extending free childcare to 30 hours and also of the Government’s support for childcare through the tax-free childcare scheme.
Notes for editors
1. The Government’s Childcare free entitlement: delivery model consultation can be read here. It lists some of the changes to childcare measures since 2010.
2. LITRG’s submission can be read in full here.
3. Low Incomes Tax Reform Group
The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 17,600 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk (Out of hours contact: George Crozier, 07740 477 374)More Articles by Chartered Institute of Taxation (CIOT) ...