The childcare element of working tax credit allows some parents to claim up to 80% of their eligible childcare costs from HMRC. The maximum weekly support you can receive is £140 (80% of £175) for one child and £240 (80% of £300) for two or more children. The actual amount you receive depends on your circumstances and income.

Qualifying for the childcare element

In order to qualify for the childcare element, there are some basic requirements:

• If you are a lone parent you must be working at least 16 hours a week. If you are part of a couple you must both be working at least 16 hours per week unless one of you is incapacitated, in prison or in hospital.
• You must use ‘registered’ or ‘approved childcare’.

HMRC require you to notify them within one month if:

• your average childcare costs go down by £10 per week or more, or
• you stop paying for registered or approved childcare.

Registered or approved

Whether childcare is registered or approved depends on what part of the UK you live in. In Scotland, Northern Ireland and Wales childcare has to be ‘registered or approved’. However, as we explain below, in England from 18 July 2009 only registered childcare is allowed.

If a childcare provider ceases to be registered or approved, the payments you make will no longer be eligible for including in your tax credits claim. This means that you must notify HMRC within one month. If you do not do so, any childcare costs you receive after the change are likely to be overpaid. HMRC will seek to recover this overpayment from you.

Parents who are already claiming help with their childcare costs must check throughout the year that their provider remains registered or approved.

It is not enough simply to ask the provider. Parents must confirm their provider’s status by contacting the regulating body. A full list of regulating bodies can be found on page 32 of  the HMRC WTC 5 leaflet.

HMRC have also set out a list of what counts as registered or approved childcare.

The new rules in England

The rest of this article deals with recent changes to the rules in England, and the effect they could have on parents, especially those who were previously using ‘approved’ but not ‘registered’ childcare.

In the past, not all providers in England needed to be registered with OFSTED to be acceptable for tax credit purposes. Instead they could be ‘approved’ providers under the Childcare Approval Scheme or approved foster carers who carried out childminding.

But from 18 July 2009:

• the Childcare Approval Scheme no longer exists. This means that anyone who was an approved provider under that scheme will have to register with OFSTED if parents want to claim their childcare costs through tax credits;
• foster carers who are also childminders now have to register with OFSTED if parents want to claim their childcare costs through tax credits.

If providers or foster carers do not register with OFSTED, but parents wish to continue using that provider, parents will no longer be able to claim help with childcare costs from HMRC. This change must be reported to HMRC within one month, but should be done as soon as possible in order to avoid an overpayment.

Action

The cost of paying unapproved childcare costs is high. We recommend that all parents make regular checks that their childcare provider remains registered.

But we also recommend that HMRC make it quite clear what lengths they expect a parent to go to in order to check that a childcare provider is appropriately approved.