Childcare and being self employed
Here at More than a Mum we are keen to support Mums who are working flexibly and one of the key areas which help, or hinder this and which we often blog about, is childcare. Last week we were at BritMums Live! and whilst we were there I listened to a great session from Georgi at starfish accounting and it raised all of these topics and made me aware of another piece of legislation nwhich, in my view, seems to penalise Mums (or Dads) who want to structure their lives so that they can work and also be the main carer for their child.
Georgi’s session told us about tax and being self-employed. It gave information about when your hobby becomes an income that HMRC should be told about, what is and isn’t considered payment in-kind and what is and isn’t tax deductable. It was within this final section that I was shocked to find yet more legislation which, in my opinion, is another contradiction. We are often told by the Governement that they want parents, and especially Mums, to return to work and yet the cost of childcare is often prohibitive. Self employment may offer more flexibilty so that you can earn, but also have less need for childcare. Obviously, however there will be some moments when work commitments may mean you still need childcare. Trying to conduct a serious business meeting with a tantrum-throwing toddler may not create the best impression! So I assumed that childcare in those circumstances would be a business expense. Apparently not.
For an expense to be tax deductable it has to be wholey and exclusively for the purpose of the business. Surely if the only reason for the childcare is so that you can work then it is a business expense? No. Childcare is considered in the same bracket as food (which is also non-tax deductable) as you would need to eat whether or not you were working, food is not considered to be wholey and exclusively for the purpose of work. Fair enough. But childcare which you have had to get soley to be able to conduct a business meeting, for example, is also considered to be something you would need anyway… I just don’t get it.
I asked Georgi what she thought and she said:
One of the frustrations of being a working mum with small children is that childcare is not a tax deductible expense. So if I have to pay for additional childcare to be able to attend a client meeting, I can’t put that down as a business expense. But I would be able to put through the cost of paying a chauffeur to drive me there – to me this makes no sense. There is so much talk about supporting mums to return to work, or to start a business, but in reality that support is pretty minimal. I believe that the additional cost to the economy of helping parents with childcare costs would be more than paid for by the additional tax revenue generated.
So being chauffered to a meeting is wholey and exclusively for the purpose of work, but having your children looked after is not…
Georgi also noted that there are benefits to being a saleried worker that are not reflected when you are self employed.
It is possible to get childcare vouchers if you are a salaried employee (including being an employee of your own limited company) – these are paid for out of your pre-tax salary which means you save both tax and National Insurance, but the amount you can receive is limited, and there is nothing equivalent if you are self employed.
But she also said that things are set to look up.
However from the autumn of 2015 working parents will be able to get some money towards their childcare costs which could save up to £1200 per year for each child, so things are set to improve.
If you want more information on the upcoming changes, Georgi has written a blog on her own website about childcare tax relief and the new scheme set to kick in in 2015.
What do you think? How do you use childcare within your working life? Do the current systems help or hinder your journey back to work or not?