IR35 - are child care payments salary?

[IR35 Avoider]

Assume all contract income is IR35-caught, no employment contract and salary below minimum wage. Currently, apart from low salary, pension contributions are used to offset remainder of potential IR35 liability.

If the company pays £243 a month for childcare to a nursery, can that payment be counted towards the goal of paying 95% of caught income as salary, expenses or pension?

(I have spent two hours searching this site and the internet and not found the answer. I did find a very old post on the internet that said the answer was different for NI than for tax, and that you had to do the deemed payment calculation twice!)

[SimonMac]

Assume all contract income is IR35-caught, no employment contract and salary below minimum wage. Currently, apart from low salary, pension contributions are used to offset remainder of potential IR35 liability.

If the company pays £243 a month for childcare to a nursery, can that payment be counted towards the goal of paying 95% of caught income as salary, expenses or pension?

(I have spent two hours searching this site and the internet and not found the answer. I did find a very old post on the internet that said the answer was different for NI than for tax, and that you had to do the deemed payment calculation twice!)

Would a better method not be to use the Childcare Vouchers Scheme, this would then be a BiK so I assume would count towards the 95% with the added bonus of the tax relief so you still get to screw hector just a tiny bit

[Clare@InTouch]

Would a better method not be to use the Childcare Vouchers Scheme, this would then be a BiK so I assume would count towards the 95% with the added bonus of the tax relief so you still get to screw hector just a tiny bit

You don't need to use a Childcare Voucher scheme as long as the payment goes direct from the Limited company bank account to the provider - buying vouchers just means you're paying admin fees when you don't need to. From HMRC:


Commercial childcare and childminders
Definitions or restrictions:
You provide childcare support to your employees by contracting directly with a childcare provider - such as a commercial nursery or a childminder.

What to report, what to pay – up to £55 per week (£243 per month)
The first £55 per week is exempt from tax and NICs for all employees and doesn't need to be reported to HMRC, provided all the following conditions are met:

•the childcare has the appropriate registrations and approvals
•the childcare is available to all of your employees
•the children cared for are your employees' children, or children for whom your employees have parental responsibility
•the childcare covers up to the end of the week containing 1 September following each child's 15th birthday (16th birthday for children with a disability)
What to report, what to pay – above £55 per week (£243 per month)
For employees earning at a rate of less than £8,500 per year, you have:

•no reporting requirements
•no tax or NICs to pay
For company directors and employees earning at a rate of £8,500 or more per year:

•report the amount above £55 on form P11D - section M
•pay Class 1A NICs on the amount above £55 per week

HM Revenue & Customs: Childcare




From an IR35 point of view the cost is allowable, but I'm still looking for a link that verifies.

[IR35 Avoider]

I'm planning to take the childcare out of the 95%, if anyone thinks it should come out of the 5%, let me know.