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Employer-supported tax relief restrictions branded unfair

Employer-supported tax relief restrictions branded unfair

The Chartered Institute of Taxation has branded the government’s proposals to restrict the tax relief on childcare supported by employers as unfair and unnecessarily complicated.

Both the CIOT and the LITRG voiced their criticisms in a pre-budget government consultation. The chair of the CIOT’s sub-committee on employment taxes, Colin Ben-Nathan, said the existing regulations are well established and reasonably simple to administer.

The government’s new plans will make matters more complicated and increase the administrative burden on employers even though the coalition has committed to a simplified taxation system. It will also mean that people with similar roles and similar incomes would be allowed different amounts of tax relief.

The technical director of the LITRG, Robin Williamson, pointed out that it is often advantageous to claim help with the cost of childcare through tax credits rather than the offered vouchers. However, there are complex calculations involved and the proposed alterations will make them even more complicated.

Furthermore, the current proposal is unworkable, he continued. It appears to rely on something similar to a ‘back of the envelope’ method of calculating income. The Low Incomes tax Reform Group is concerned that the model could be used in the future to restrict other tax reliefs such as the proposal to withdraw child benefit from high earners.

The LITRG would like to see a system that provides certainty for employees and is simple for people to understand.

The previous government initially proposed restricting tax relief on employer-supported childcare in the 2009 pre budget report. It was confirmed by the present government in the last budget and will apply to people joining employer schemes after the 5th of April this year.

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Image: pylonen by loop_oh

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