Tax-Free Childcare costs top £35m

Katy Morton and Catherine Gaunt
Monday, June 12, 2017

The Government has spent more than £35m on implementing Tax-Free Childcare, which since its launch seven weeks ago has been plagued with problems.

An analysis of Government spending on the scheme by the Childcare Voucher Providers Association (CVPA) reveals that since 2014, £35.4m has been spent on developing and implementing the IT system, as well as on marketing, advertising and research for Tax-Free Childcare.

The CVPA has analysed monthly figures on HMRC spending, published on the website.

As the major contractor, National Savings & Investments (NS&I) has been paid by far the largest sum so far – £34.3m for ‘costs relating to the development and implementation of the IT solution being delivered by ATOS’.

The ad agency WCRS has been paid £468,281 for marketing and advertising; digital solutions agency Orangebus, owned by Capita since 2016, has received £368,400 in payments.

The remaining costs have been largely to carry out research.

Parents and childcare providers continue to report problems with the online system, called the Childcare Service, operated by HMRC with NS&I.

Many parents are still unable to open or use their account. There have been numerous reports of parents who, after paying into their Tax-Free Childcare account, have been unable to access their money and left having to find it from elsewhere to pay their childcare fees or incur a ‘late’ fee.

CVPA chair Jacquie Mills, said, ‘We’re concerned that the Government’s Tax-Free Childcare scheme was rushed out ahead of the election to the detriment of parents. There have been a wide range of difficulties reported so far, which is deeply worrying.

‘We are urging parents to think carefully before switching irreversibly from childcare vouchers to TFC – not just because of the issues reported so far, but also because many families could actually be worse off financially through TFC compared to childcare vouchers.

‘We are therefore calling on the Government to reconsider their plans to close vouchers to new users from April next year.’

Writing on Twitter on 1 June, @TinaHaigh said,, ‘No childcare vouchers this month as had to cancel them to join TaxFree Childcare which isn’t working. Left with higher than expected costs.’

@Adiman81 tweeted on 2 June, ‘I’ve been totally locked out [from Tax-Free Childcare] for a week…nursery demanding money. Awful system.’

A parent in Northern Ireland told Nursery World that she has been waiting four weeks for her Tax-Free Childcare account to be approved.

The parent of two children, one of whom is registered disabled, said, ‘I have had an ongoing saga with Tax-Free Childcare for four weeks. Three weeks ago, phone staff created my application as there were bugs on the website and I was not able to create the application. I phoned ten days later as I heard nothing from them, and I have been phoning ever since with no progress.

‘Staff regularly claim that I have not signed up. Eventually they find me on the system and say I have been referred to technical support, who apparently have a massive backlog of issues to resolve, so they have no idea when my application will be dealt with. Meanwhile I am losing out as I am not getting the childcare subsidies to which I am entitled, money which would enable me to take my son to more sessions with his therapists, or pay for extra support. I feel I should give up and use childcare vouchers.’

She added, ‘The Tax-Free Childcare website has had copious defects and displayed misleading error messages. As a professional software tester, who is paid to assess the quality of web services and software, this became painfully apparent during my four attempts to sign up to the scheme.’

Access denied
Nurseries also continue to experience problems, including having to wait up to five days for the money that parents have transferred via the Childcare Service to appear in their account.

Some settings are still unable to set up their account because they are waiting for their Unique Tax Reference or have been given the wrong log-in details by HMRC.

first-steps-kindergarten-leamington-spaFirst Steps Kindergarten in Leamington Spa (right) has experienced numerous problems with the registration process.

The nursery’s business manager Gilly Stockley told Nursery World that she had registered online in October 2016, but did not find out until March that HMRC had no record of this.
‘I received the initial letter in October but was unable to log on due to the incorrect ID number being sent to me,’ she said.

‘On 20 October I received the correct ID number and registered. In March 2017 I received a notification that we had not yet registered, so I did so again on 28 March.

‘On 16 May I was informed by a parent that we were not registered on the system. I rang HMRC to check and was informed that sometimes it can take two to three attempts, so to try again.

‘On 19 May, the parent tried again to no avail, so I rang HMRC who promised to submit a report “for a fix within five working days”.

‘There was no response, so on 1 June I followed up, but was informed the portal was down so would need to try again.

‘On 6 June I followed up. HMRC sent a further request through to “technical” but said it could take a while for a response as they were very busy. They suggested we could try using Firefox rather than Google Chrome as people seem to be having more success with that. I will try, but am not convinced.’

She added, ‘The parent has set up his account and paid in his money, but is unable to pay us.

‘The parent who has registered has two children at the nursery attending for three days full-time, so 30 hours each, one child in the baby room and one under-three.

‘It is quite a lot of money. We’re fortunate that we can live with it. My advice to nurseries would be get one of your parents to check to see if they can actually pay you.’

Ms Stockley said that while most parents were aware of Tax-Free Childcare, many were still using childcare vouchers.

‘They all know about it but the majority of people are still using vouchers and don’t really want to change. I’m still getting lots of payments with vouchers, and even people I show around say they will use them. You can’t blame them when they hear of these problems.’

HMRC said the service had been live for 95 per cent of the time since launch, and that on average more than 1,000 people a day were applying successfully.

An HMRC spokesperson said, ‘We are sorry that some parents and childcare providers have been experiencing difficulties with the Childcare Service. We have already made significant improvements to the service and the majority of people are successfully using it.

‘We are working hard to make further improvements; however, anyone continuing to experience problems or struggling to make payments can call our dedicated helpline on 0300 123 4097, where trained staff will be ready to support parents. We have measures in place to ensure that nobody is left out of pocket.’

Providers are also advised to ring the helpline number for support.

NS&I said that as a delivery partner, they have worked with HMRC to build the childcare service. The decision for HMRC to work with NS&I was taken following a public consultation.
It added, 'Atos has a long-standing contract with NS&I to support its payment processing services for government clients. NS&I does not have a relationship with Orange Bus.'

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