The implementation date of the Tax-Free Childcare Scheme (TFCS) has been pushed back until early 2017 following a Supreme Court decision. The scheme was expected to be launched later this year but was delayed as a direct result of a legal challenge to the introduction of the scheme. The legal action was instigated by a small group of childcare voucher providers who won an injunction preventing the implementation of the TFCS this autumn. The group argued that the Government’s decision to deliver the TFCS accounts through HMRC working in partnership with NS&I was unlawful and should have been subject to an open tender.
However, the Supreme Court has unanimously dismissed their appeal. As a result of the legal action, the court had placed a suspension on the development of the scheme which prevented key delivery steps from taking place during the legal proceedings.
Once launched, the TFCS will support working families with their childcare costs. The new scheme will replace the current salary sacrifice scheme and will be open to all qualifying parents including the self-employed and those on a minimum wage.
Barring any further changes, the scheme will be worth up to £2,000 per child each year and will be available initially to children under the age of 5 but will be expanded over time to include all children under 12. For every 80p in the £1 contributed by parents an additional 20p or 20% will be funded by Government up to a maximum of £10,000. Parents will be able to have one childcare account for each qualifying child. In order to be eligible to use the scheme neither parent can earn more than £150,000 a year.
Exchequer Secretary to the Treasury, Damian Hinds said:
‘We are pleased that the Government’s proposals for delivering Tax-Free Childcare have been found to be clearly lawful. This Government is absolutely clear on the importance of supporting families with their childcare costs. It is disappointing that some organisations involved in the existing scheme felt the need to take and persist in this costly and wasteful course of action, which has led to a delay in the launch of Tax-Free Childcare.’