Overview

The Childcare Payments Bill establishes a new system of government top-up payments towards childcare costs for eligible working families. It aims to reduce the cost of childcare for working parents by contributing 25% of qualifying childcare costs, up to a maximum of £2,000 per entitlement period (3 months). The bill also restricts tax exemptions for employer-provided childcare schemes.

Description

Eligibility Criteria

To be eligible, individuals must be at least 16, responsible for the child, residing in the UK, and both parents must be in qualifying paid work. Their combined income must not exceed a specified limit, and neither parent can claim Universal Credit or be part of a relevant childcare scheme that offers similar benefits. Specific criteria are defined in the bill, including what constitutes "qualifying paid work" and "qualifying childcare" (registered or approved childcare, primarily to enable work). Regulations will further define these aspects, and exceptions can be made.

Childcare Accounts

Eligible individuals must open a childcare account, which can be managed by HMRC or approved providers. Payments (excluding top-up payments) made into the account by anyone are considered "qualifying payments." These payments are capped at £2,000 per 3-month entitlement period. Funds can only be withdrawn for qualifying childcare expenses. The bill outlines rules and penalties for misuse, including prohibitions against certain withdrawals and payments.

Information Sharing & Penalties

The bill allows HMRC to obtain information from various sources to verify eligibility and enforce regulations. It details penalties for inaccurate declarations of eligibility, non-compliance with information requests, and making prohibited payments or dishonestly obtaining top-up payments. These penalties range up to 50% of the maximum available top-up payment for deliberate inaccuracies. HMRC also gains enforcement powers, including disqualification orders.

Tax Exemptions

The bill limits tax exemptions for employer-provided childcare vouchers and employer-contracted childcare schemes, redirecting eligible employees toward the new childcare account system.

Government Spending

The bill introduces a new government expenditure program. The exact cost is not specified in the bill text, but it will be at least 25% of the qualifying payments made by eligible parents up to a maximum of £2000 per 3 month period. The government spending will therefore depend entirely on the uptake of the scheme by eligible families.

Groups Affected

• Working families with children: Potentially benefit from reduced childcare costs through top-up payments.
• Employers: Affected by restrictions on tax exemptions for existing childcare schemes.
• Childcare providers: May see increased demand due to the scheme.
• HMRC: Responsible for administering the scheme, collecting information, and enforcing regulations and penalties.
• Tax Credit and Universal Credit Claimants: Will experience changes in relation to other relevant childcare support, subject to the bill's provisions.

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