E m e r g i n g I s s u e s
month in childcare vouchers instead of cash from the MOD. Since scheme members only pay tax and National Insurance Contributions (NIC) on the reduced salary, they will make some tax/NIC savings; in effect, the childcare vouchers are tax/NIC exempt. The upper limit of £243 is set by HM Revenue and Customs and is per person in the scheme, not per child.
The vouchers can be used to pay (or part pay) for childcare costs from a regulated (formally registered) childcare provider.
How and when are vouchers issued? Each month scheme members will receive their cash salary from the MOD under exactly the same arrangements and at the same time as they would do if not in the scheme. The childcare vouchers or electronic voucher credits will be available from the scheme provider within 5 working days of salary payment either by post for paper vouchers or as an electronic transfer from Sodexho Pass as the scheme provider.
What are the benefits? The main benefit is the tax/NIC savings made from a reduced cash salary, but the actual amount saved will vary according to personal circumstances. Income, number of dependants, childcare costs and whether in receipt of any tax credits will all affect what might be saved, but a typical standard rate taxpayer could save up to £962 per year whilst higher rate taxpayers could save over £1100 per year.
Annual savings based on monthly childcare costs of: £50
Annual Sallary £40k +
£10k - £33k £100 £150 £200 £243
£246 £492 £738 £984 £1,196 £198 £396 £594 £792 £962
Can I benefit? Although it is dependent on your personal circumstances, generally ifany of the following apply to you it is worth considering childcare vouchers:
• You have childcare costs of more than £175 per week if you have one child or £300 per week for two or more children.
• You are receiving tax credits below £545 per year (or £1090 if you have a baby under the age of one) and are claiming for your childcare.
• You are a higher rate taxpayer. Are there any drawbacks?
There are a number of potential drawbacks that you need to consider. Salary sacrifice means you have lower gross pay so you must review what impact this will have on any other benefits (such as tax credits or earnings- related benefits) or gross pay calculations
(such as maximum mortgage loans). In particular you should note:
• Tax Credits. Some people on lower salaries will be better offnot using childcare vouchers.
• Pension. The new Armed Forces Pension Scheme (AFPS05) is based on a gross pay calculation. However, the MOD has agreed that AFPS05 pension calculations will discount any salary sacrifice (i.e. the pension will assume you were still receiving all the salary in cash). Members of AFPS75 with a salary sacrifice agreement will also not be affected.
• Contribution and earnings-related benefits. The amount you may be eligible for in contribution-based benefits such as Jobseekers’ Allowance and Incapacity Benefit could be affected by a salary sacrifice agreement.
• Statutory Maternity Pay (SMP). SMP is based on earnings and is assessed on the basis of actual cash salary being paid between the 23rd and 15th weeks before the expected week of birth. If a pregnant Servicewoman is a scheme member during that period, her SMP will be calculated on the lower level of pay. This is normal practice for salary sacrifice schemes. Therefore, pregnant Servicewomenmustwithdraw from the scheme by the 23rd week before the expected week of birth in order to be assessed for, and eventually receive, the full rate of maternity pay.
How do I apply? You apply directly to Sodexho Pass for an Information pack and/or application pack. On receipt of the application Sodexho Pass will check that it is completed correctly.
Where can I use the vouchers? You can use the vouchers in lieu of cash to pay for regulated childcare such as: • Nurseries and play schemes • Registered childminders • Out of school clubs (either after school or during the school holidays)
• Childcare schemes on school premises run by a local authority
• Nannies looking after the child at home • Childcare away from the child’s home by a person approved to care for the child or children aged 8 or over
Childcare provided in the child’s own home will not qualify if the childcare provider is a relative of the child, even if that person is registered.
Where will I go for that advice or other information on the scheme? Sodexho Pass will provide comprehensive information packs, online information and will run a helpdesk to provide advice and guidance for you and your family. AFCVS@sodexhopass.
co.uk. Alternatively you can write to:
Armed Forces Childcare Voucher Scheme, Sodexho Pass Ltd, 5 Albany Court, Albany Business Park, Frimley Road, Camberley, GU16 7QR
Will I need to contact my HR staff or use JPA? No. All you have to do is ensure that the scheme is right for you, fill out the application form and send the correctly completed form back to Sodexho Pass.
Can I backdate my application for childcare vouchers? No. You apply to change the balance of your remuneration to a combination of cash and childcare vouchers when you become a scheme member. You cannot change your balance of remuneration in the past; you have already been paid (in cash). This is a basic aspect of how salary sacrifice works.
Can I return unused vouchers? No, this will not be possible as the vouchers are issued in lieu of cash salary and represent part of your total remuneration. You will need to plan in advance for how many childcare vouchers you elect to receive. You cannot sell them on or give them to others; they can only be used for regulated childcare for your eligible children.
What if I am stationed overseas, can I still get childcare vouchers? You will still be able to use the scheme overseas as long as the childcare provider you use is regulated. The MOD has accredited two bodies to regulate childcare overseas: British Forces Early Years Service (BFEYS) and SSAFA-Forces Help.
Can both parents join the Armed Forces Childcare Voucher Scheme? Yes, if both parents are Service personnel.
THE RAF FAMILIES FEDERATION WEBSITE
T
he RAF Families Federation website is now up and running at www.raf-families-
federation.org.uk we would
welcome your visit to the site. It is there for you. If you have any RAF related family issues that you would like us to address on your behalf then please use the email link to let us know. Te site will also keep you informed of policy changes affecting RAF families and provide useful links to those who can help. If you would prefer to ring the Federation our number is 01780 781650.
Winter 2007 5
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