Government seeks views on who should run tax-free childcare

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The Treasury has launched a further five-week consultation on Tax-Free Childcare in the face of a legal challenge from childcare voucher companies.

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The consultation will consider how parents’ childcare accounts will operate.

Earlier this year, the Government came under fire from voucher providers for failing to consult on the issue, after announcing that the scheme would be administered by National Savings & Investments, a Government body with no experience of working with childcare providers.

The Childcare Voucher Providers' Association launched legal proceedings against the Government. As a result the Treasury is conducting a further five-week consultation.

It is now consulting on ways that it could deliver childcare accounts itself, through National Savings and Investments (NS&I) or through HM Revenue and Customs (HMRC).

The latest consultation follows one last year on the implementation of the scheme and which also looked at different market structures for private provision of the accounts.

The current childcare voucher schemes will be phased out and closed to new entrants when tax-free childcare is introduced in autumn 2015.

Julian Foster, managing director of Computershare Voucher Services and a board member of the CVPA, said, ‘Government’s decision to consult on the most appropriate provider of Tax-free Childcare is a positive step.

‘This will allow all interested parties, whether they be parents, childcare providers, taxpayers or childcare voucher providers, the chance to comment on this crucial element of the new scheme.

‘Support for childcare costs is vital for working parents. The voucher providers are keen to continue to work with Government to ensure parents are aware of - and receive - the support they are entitled to. The CVPA will, of course, be engaging fully with the consultation process.’

Tax-free childcare will provide all working parents earning more than £50 a week 20 per cent of their annual childcare costs.

The Treasury said that this means that all interested parties will have had a chance to comment on all of the options for account provision across public and private sectors.

The Government will consider both consultation responses before it makes its final decision on who will operate childcare accounts.

A Treasury spokesperson said, 'The consultation will ensure all interested parties have had an opportunity to comment on all of the options for delivering accounts through the public sector, in addition to the options for delivery in the private sector.'

Earlier this year the Government confirmed that it would expand the TFC scheme to working parents under the age of 12, a year earlier than intended.

Initially the scheme was planned for parents with children under five and disabled children under 17, with families with children under 12 years old being included in 2016.

Parents will now receive 20 per cent of their annual childcare costs up to £10,000 a year, up from a limit of £6,000 previously. This means that parents will receive up to £2,000 towards their childcare costs per child per year.

The consultation closes on 27 June.