In light of recent warnings from HM Revenue & Customs (HMRC), businesses running workplace nursery schemes must understand and follow the relevant regulations.
Read more: Ensuring compliance with workplace nursery schemes
Proper compliance is essential to avoid the risk of significant tax penalties.
What are workplace nursery schemes?
Workplace nursery schemes are designed to assist working parents with the cost of childcare.
These schemes allow employers to provide childcare facilities either directly or through a third-party provider.
Employees benefit from tax and National Insurance (NI) exemptions on the cost of childcare, making these schemes attractive for both employers and employees.
HMRC’s recent warning
HMRC has highlighted the misuse of workplace nursery schemes by some businesses.
Any attempt to use these schemes improperly to reduce tax payments will attract substantial penalties.
It is vital to ensure that your scheme is genuinely providing childcare services and not just a means to disguise payments.
Key compliance requirements
To remain compliant with HMRC’s regulations, businesses should consider the following key points:
Genuine provision of childcare
Ensure your nursery scheme genuinely offers childcare services. The structure must provide real benefits to employees.
Any arrangement that appears to be a disguised payment will face scrutiny from HMRC.
Legally binding agreements
Have clear, legally binding agreements with third-party childcare providers.
These agreements should outline the nature of services, costs, and duration.
Detailed records of these agreements are essential for demonstrating compliance.
Transparent financial transactions
All financial transactions related to the scheme must be transparent and accurately recorded in your accounts. Inaccurate or misleading reporting can lead to HMRC investigations and penalties.
Employee eligibility verification
Verify the eligibility of employees participating in the scheme. Tax and NI exemptions apply only to employees who meet specific HMRC criteria.
Ensure your records reflect the eligibility of each participating employee to avoid issues during HMRC investigations.
The consequences of non-compliance
Failing to comply with HMRC regulations can result in severe consequences. Substantial fines can be imposed for non-compliance, public disclosure of non-compliance can harm your business’s reputation, and in severe cases, HMRC may pursue legal action against your business.
How we can help
If you have concerns or need assistance ensuring your workplace nursery scheme meets HMRC’s requirements, our team of experienced accountants is here to help.
We provide expert advice and support to ensure your business remains compliant.
Contact us today to learn how we can assist you in dealing with workplace nursery schemes and maintaining compliance with HMRC regulations.
