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Basic Earnings Assessment


 

Please read the below excerpt from GOV.UK

 
For employees who joined an employer provided childcare voucher scheme from 6 April 2011, the employer must make an estimate of the employee’s relevant earnings amount for the tax year that childcare vouchers are provided for (see EIM16053).
 
The estimate is the employer’s responsibility. The estimate will establish the “exempt amount” for that tax year. In making the estimate the employer should act reasonably, taking due care. The estimate should be based on information available at the time. The employer is not required to speculate on what may or may not take place in the future.
 
Providing that the employer acted reasonably, the estimate should not be reviewed later in the tax year whether as a result of a change in the employee’s circumstances or because events show that the estimate was misconceived. Any change in the employee’s circumstances should be reflected in the estimate for the next tax year.
 

Relevant earnings amount

 
This is calculated for each tax year by first adding:
  • the amount of any relevant earnings for the tax year from that employment and
  • any other amounts treated under Chapters 2 to 12 of Part 3 ITEPA 2003 as earnings from that employment

Then deducting:

  • the sum of any excluded amounts (see EIM16056).

 

Meaning of “relevant earnings”


For this purpose, “relevant earnings” means any salary, wages or fees and any of the following:

  1. guaranteed contractual bonuses;
  2. contractual commission;
  3. guaranteed overtime payments;
  4. location or cost of living allowances;
  5. shift allowances;
  6. skills allowances;
  7. retention and recruitment allowances; and
  8. market rate supplements.

 

Estimate made during a tax year


If an employer is required to make an estimate of the employee’s relevant earnings amount for a tax year because

  • the employee joins the employer provided childcare voucher scheme, and
  • the employee only began that employment during the tax year,
for the purpose of making the estimate, the employer should not take account of any previous earnings.
 
The employer should estimate the aggregate sum of the amount of any relevant earnings and any other amounts treated as earnings from that employment for the remainder of the tax year. That sum must then be multiplied by a figure calculated using the formula:

 

365/RD
 
where RD is the number of days remaining in the tax year from the date that the employment began.
 
The sum of any excluded amounts is deducted after making this adjustment.
 

 

What will Computershare do?

 
We will contact a parent on your behalf, if you have reduced their order following a tax band change, or if they have reached their allowance. You may want to tell your employees who receive childcare vouchers, what their childcare allowance is for the 2017-18 tax year.
 

Where do I file it?

 
You don’t need to file this with HMRC, but you must keep a copy of the assessment on file (paper or electronic). The HMRC will look for it during a PAYE Investigation.
 

Is it important?

 
Yes, employees will only make tax and National Insurance savings on payments within the relevant limits if you have carried out a BEA.
 
Without it, the value of the childcare vouchers supplied will be subject to income tax and National Insurance contributions.
 

Where can I find out more information?

 
Please visit the Government website and also take a look at their guidance and FAQs for employers.
 
Tax-Free Childcare
 

The new Tax-Free Childcare (TFC) scheme – an alternative to childcare vouchers - is being rolled out by government from early 2017.
 
Whilst some families may be better off with TFC, many will not. So we’re here to help you help your employees understand the differences between TFC and childcare vouchers, so they can make the right choice for your family.
 
There are a number of eligibility criteria but, assuming your employee’s family is eligible for both schemes, a general rule of thumb is that childcare vouchers may be better for smaller families with lower childcare costs, and TFC better for larger families with higher childcare costs.
 
However, they can’t switch back and forth between the two schemes, as their childcare needs change. Families who register for TFC can’t switch to childcare vouchers at a later date, but parents who are registered for childcare vouchers can switch to TFC.
 
Your childcare voucher scheme will close to new entrants in April 2018, but it will remain open for those parents already taking childcare vouchers, and who want to continue taking them (for as long as they remain eligible).
 
For more information, and downloads, videos and news updates to share with your employees please visit www.giveyourselfachoice.com.
 

To understand what government help is available to help parents with their childcare costs please visit www.childcarechoices.gov.uk.