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THE long-awaited proposals offering tax breaks on workplace nurseries have been branded as a tax increase masquerading as a tax credit. Far from encouraging employers to increase childcare facilities, the proposals are more likely to lead to closures, reports The Telegraph.

In a consultation document published last month, the Revenue proposed that employees would receive tax relief on nursery provision worth £50 a week. Tax would be payable on the value of facilities worth more than that.

However, the vast majority of employees pay no tax on payments made to workplace nurseries at present, provided that the employer has secured Revenue approval.

The ACCA had condemned the £50 cap, describing it as "a tax increase marketed as a tax credit."

According to Ernst & Young, "If employees are now going to face paying tax on these services, they may well choose not to use the facilities offered at work."

£50 a week for childcare has been derided as far too low, particularly in London and the South East where employers can often spend up to £150 a week on such facilities.

Commenting on the cap, TaxZone member, Ms Rebecca Cave said: "This would restrict the benefit of childcare vouchers which are currently taxable without limit. It would also tax workplace nursery places above £50 per week which are currently tax-free however much childcare is provided." She called for tax advisers to respond to help ensure the final version of the regulations were sensible and workable.

Mr Dawn Primarolo, paymaster general, described the measures as "a major step forward in the Government's attempt to increase childcare support."

The Revenue admitted that only 20,000 people were likely to pay less tax.

(Source: AccountingWEB)

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