Tax-Free Childcare glitch leaves providers with an 'admin impossibility'

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An upgrade to the Tax-Free Childcare system has left providers unable to identify parents’ transactions.


An update to the TFC system has meant providers are unable to see payment references

Nursery owners including Jennie Johnson of Kids Allowed and Ian Morgan of Little Ducklings Day Nursery have reported being unable to identify which payment through the Tax-Free Childcare (TFC) system relates to which child as parent references, which allow payments to be allocated to a parents’ account, are missing on provider receipts.

At the moment, references on all payments are showing up as ‘National Savings A’.

It comes as new Government figures show around a third of the number of families initially expected to use Tax-Free Childcare (TFC) have done so in the last tax year. According to the HMRC figures, a total of 160,000 families used TFC in the last year – well short of the 415,000 families the Government had hoped would be using the system by December 2017 at the outset.

HMRC, which manages the TFC system, said the glitch has occurred due to a recent upgrade to improve performance and customer experience. It was unable to say how many providers have been affected.

Provider comments

Ian Morgan, director of Little Ducklings Day Nursery, said, ‘The removal of the identifying TFC reference from TFC payments is an incredible oversight and gaff on behalf of HMRC. With two nurseries and 60-plus TFC payments a month, the amount of time to reconcile payments is going to skyrocket! We as providers had just got comfortable with TFC payments, this is a major setback.’

Childcare providers have also taken to social media to air their frustrations.

Jennie Johnson, chief executive of Kids Allowed, tweeted, ‘This morning [yesterday] the sectors’ TFC receipts have all come through referenced just 'National Savings' and are missing the parent reference that allows them to be correctly allocated to a parents account. Administrative impossibility... As if we don't have enough to do.’

Writing on Facebook, Jo Morris Golds, director of Playsteps Day Nursery in Swindon and spokesperson for Champagne Nurseries on Lemonade Funding (CNLF), said, ‘Just when it was starting to work properly, why, oh why, must things constantly be sent to try us?’

Neil Leitch, chief executive of the Early Years Alliance, said, ‘This latest change to the payment system seems to have taken place without communication, consultation or testing with the sector. Given HMRC’s track record of technical problems, this is not good enough. There’s no doubt this will have caused an additional, significant administrative burden for providers at a time when they are preparing for the new term.’

Responding to the latest HMRC figures on TFC usage, he added, ‘It now seems inevitable that there will be yet another underspend on this failing Government policy. It’s imperative that any Tax-free Childcare surplus finds its way to the families and providers currently subsidising the £662 million shortfall in the Government’s early years funding, rather than being pocketed by the Treasury – something that simply cannot happen again.’

HMRC response

An HMRC spokesperson said, ‘We apologise for the inconvenience caused by this issue with payment references. We are working hard to resolve it and if parents or childcare providers have problems, they can call us and we will help them.’

Responding to the latest statistics, HMRC said, 'More than 345,000 families have a Tax-Free Childcare account.

'A growing number of families are benefiting from the service, with the numbers doubling from this time last year. We are running a national communications campaign to raise awareness and encourage more parents to apply.'


This afternoon, HMRC confirmed it has fixed the issue with incorrect payment references and plans to write to affected providers to give them the corrected references for each of the affected payments.

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