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Controversy over Withdrawal of Childcare Tax Relief

United Kingdom
Written by
Lewis Silkin, widely recognised as the UK’s leading specialist employment law practice.
Controversy in the UK over Withdrawal of Childcare Tax Relief

The Government is facing major opposition to its plans to remove tax relief on employer-supported childcare.  Under the proposal, first announced by prime minister Gordon Brown at the Labour Party conference in September, tax and national insurance relief will not be available for employees who join a childcare voucher scheme operated by their employer after April 2011, although existing members of schemes will continue to enjoy the same relief until April 2015.

The Government’s reason for phasing out the tax relief is that it is badly targeted.  It claims that a third of the benefit for employer-supported childcare goes to higher earners, who should be able to pay the full cost themselves.  The plan is to use the money saved to extend provision of free nursery places to two-year olds from the poorest families.

The proposal is nonetheless attracting fierce opposition from both the public and MPs (particularly Labour).  More than 60,000 people have signed a petition on the Downing Street website protesting about the prime minister’s decision and urging him to reconsider, whilst over 80 MPs have signed a parliamentary motion criticising the move.

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