Opinion Former Article

CIOT: Employer burden means childcare proposals warrant further thought

The Chartered Institute of Taxation (CIOT) is calling on Government to reconsider its decision to go ahead with changes to the tax relief available on employer-supported childcare.

The Government confirmed today that proposals to restrict the tax relief available on employer-supported childcare schemes would proceed. Legislation will be included in the Finance Bill 2011 to restrict the level of tax relief available to higher rate and additional rate earners who join schemes from 6 April 2011.

Colin Ben-Nathan, Chairman of the CIOT's Employment Taxes Sub-Committee, commented:

"We are disappointed that the Government has not listened to our concerns that this proposal will complicate matters and introduce a significant additional burden on employers.

"The mechanism proposed for restricting tax relief on employer-supported childcare is, in our view, impractical and depends on an employer's 'back of the envelope' calculation of 'basic' earnings. The employer is required to estimate whether the employee will be a higher rate/additional rate taxpayer in the coming tax year, and the employee has no right of appeal.

"We are also concerned that this will put the employer in a difficult situation and impact on their relationship with their employee.

"Although the change only affects higher/additional rate taxpayers, employers will have to undertake the process of estimating employment income for all employees joining a ESC Scheme from 6 April."

Notes for editors

1. The Chartered Institute of Taxation (CIOT) is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT's primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it - taxpayers, advisers and the authorities.

The CIOT's comments and recommendations on tax issues are made solely in order to achieve its primary purpose: it is politically neutral in its work. The CIOT will seek to draw on its members' experience in private practice, government, commerce and industry and academia to argue and explain how public policy objectives (to the extent that these are clearly stated or can be discerned) can most effectively be achieved.

The CIOT's more than 15,000 members have the practising title of 'Chartered Tax Adviser' and the designatory letters 'CTA'.

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George Crozier
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