TaxPersonal TaxPre-Budget 2003 : Hidden threat in childcare tax breaks

Pre-Budget 2003 : Hidden threat in childcare tax breaks

UK businesses may use childcare tax breaks as an excuse to lower employees' wages, following a scheme announced by Gordon Brown in his pre-Budget speech.

Link: Pre-Budget 2003 special

Companies will have the option of giving their employees £50 a week towards an employee’s childcare costs – free of tax and national insurance. The windfall follows a series of consultations between the government and businesses.

Bill Kirwan, leader of PricewaterhouseCoopers’ employment taxes UK practice, said this would present a big advantage for employers: ‘Instead of giving the employee an extra £50 a week, they will enter into an arrangement with the employee to have their salary reduced. You then get a double impact on the tax saving.’

Kirwan also suggested that the money could give businesses the opportunity to encourage more people into the workplace, although he felt that £50 was too small a figure to make much of an impact.

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