Help please with Tax Free Childcare computations (in UK)

Fordy62

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Jun 15, 2018
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Hello all,

im not sure where the majority of the forum are based do let me give a little background into my issue.

In the UK, because the cost of childcare is so high, the government allow payments to childcare provider to be made tax free. The way in which this works, is that I pay money into an online account and HMRC (her majesty’s revenue and customs) top it up.

from their website, they give the following example...

for every £8 I pay into my account, they’ll contribute £2. Or, to put it another way, by the time they’ve topped it up, they’ll have paid 20% of the cost.

Late 2017, the automatic top ups stopped occurring. This meant that I needed to apply for compensation to retrospectively claim what should have been automatically topped up in the first place.

Over the course of the 4 months my claim relates to, I paid £3,385 to my childcare provider. I submitted a claim for compensation and HMRC paid me £677. Their calculation being that this represents 20% of what I paid.

I argue that this isn’t right. Because this is all my money. And there’s no top up from them. if The account had been working properly then I should have only paid in £2708 and then their top up of £677 would have been correct. But because I’ve paid £3385 of my own money, the top up should be made to represent my own money that I’ve spent.

Is anyone still with me? If their payment is correct, then I’m surely out of pocket on a proportion of the money that I’ve paid that hasn’t been topped up?

i argue that the compensation payment to me should have been £845.

Can anyone give their calculations on the above! I’ve come to a maths forum, because I have every confidence in you all to come up with a reasoned calculation!
 
for every £8 I pay into my account, they’ll contribute £2. Or, to put it another way, by the time they’ve topped it up, they’ll have paid 20% of the cost.
.....

Over the course of the 4 months my claim relates to, I paid £3,385 to my childcare provider. I submitted a claim for compensation and HMRC paid me £677. Their calculation being that this represents 20% of what I paid.

Based on their own example they are supposed to pay 2/8 = 25% of your portion, not 20%.
 
Hello all,

im not sure where the majority of the forum are based do let me give a little background into my issue.

In the UK, because the cost of childcare is so high, the government allow payments to childcare provider to be made tax free. The way in which this works, is that I pay money into an online account and HMRC (her majesty’s revenue and customs) top it up.

from their website, they give the following example...

for every £8 I pay into my account, they’ll contribute £2. Or, to put it another way, by the time they’ve topped it up, they’ll have paid 20% of the cost.

Late 2017, the automatic top ups stopped occurring. This meant that I needed to apply for compensation to retrospectively claim what should have been automatically topped up in the first place.

Over the course of the 4 months my claim relates to, I paid £3,385 to my childcare provider. I submitted a claim for compensation and HMRC paid me £677. Their calculation being that this represents 20% of what I paid.

I argue that this isn’t right. Because this is all my money. And there’s no top up from them. if The account had been working properly then I should have only paid in £2708 and then their top up of £677 would have been correct. But because I’ve paid £3385 of my own money, the top up should be made to represent my own money that I’ve spent.

Is anyone still with me? If their payment is correct, then I’m surely out of pocket on a proportion of the money that I’ve paid that hasn’t been topped up?

i argue that the compensation payment to me should have been £845.

Can anyone give their calculations on the above! I’ve come to a maths forum, because I have every confidence in you all to come up with a reasoned calculation!
After they have paid "you" £677, your out of pocket expense is = £3385 - £677 = £2708 (same as you would have paid if the top-off was acting properly).

You "had" paid £677 extra into the "kitty" and the HMRC paid you back £677. But you had to earn (£677 + 169.25 =) £846.25

So your point is that the extra £677 that you had put in was already taxed at 25% - and you need to get that £677*.25 = £169.25 back.

You are correct as far as mathematics goes (and as I understand the situation) - but good-luck convincing the "pencil-pushers".




 
First, anything anyone says about the terms of a contract or a governmental rule is ultimately a matter of legal interpretation, and math does not beat law in court. As we say in the US, you can't beat City Hall.

Second, I suspect HM's government is correct in terms of governmental purpose.

Let's start by realizing that 2 is 25% of 8, not 20%. The 20% that you are talking about is 20% of 8 + 2, the sum of what you used to put in and what the government used to put in.

If the government's purpose is to subsidize 20% of the cost of child care, then 677 is indeed 20% of the 3385 cost.

If the government's purpose is to subsidize 25% of the cost of child care, then 846.25 is indeed 25% of the 3385 cost.

In other words, the argument is not about arithmetic, but about purpose. I suspect that the government's purpose all along has been to cover 20% of the cost. The difference is that they are now making you front 100% of the cost and then reimbursing you for 20% of the actual cost.

Please feel free to ask more questions.
 
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