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Tax-Free Childcare - technical issues leave parents out of pocket

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1 September 2017

Tax-Free Childcare is a new system introduced by the government to help working parents meet their childcare costs. This is an alternative to the existing childcare vouchers scheme and can save tax of up to £2,000 per child, per annum.

Unfortunately, however, since its release earlier this year there have been a number of technical issues with the online site resulting in many parents’ applications being significantly delayed.  As a result, many have been left out of pocket, with childcare costs still to pay but without receiving the government top up. 

How it works

The mechanism to apply for tax-free childcare is an online form to check eligibility criteria (such as confirming both parents are working and each earning at least £120 per week).

Once HMRC have reviewed and approved the application an account is automatically set up for each child.  For every £8 contributed by the parents, HMRC will then automatically top up the account with an additional £2, up to an annual limit of £2,000, split into quarterly limits of £500.  This money can then be used to pay registered childcare providers directly.

The online account does have the facility for applicants to receive messages from HMRC, however, there is no mechanism to reply.  Therefore, if any further information or follow up is required this has to be done by phone.  When calling the helpline and being placed on hold, however, it helpfully suggests that most things can be resolved via the online account!

Issues experienced

 A wide range of issues with the online account have been reported including:

  • Technical issues when trying to register for an account
  • Waiting for several weeks for a decision on eligibility without explanation
  • Government to ups not being added to the account
  • Hours spent on the telephone to try and resolve applications with call backs promised but never returned 

Compensation

HMRC has now confirmed that it will look to compensate those who have been left out of pocket as a result of technical issues with the online account.  

You might, therefore, be eligible to apply for compensation if you have:

  • been unable to complete your application;
  • been unable to access your online childcare account; or
  • not received a decision on whether you’re eligible for more than 20 days without any explanation. 

To apply for compensation you must, somewhat ironically, complete an online form, before printing it and posting to HMRC!  A link to the form can be found here. 

If you would like to find out more as to whether you could be eligible for tax-free childcare or you would like to receive a copy of our Tax-Free Childcare factsheet, please contact us on 01242 237661.