TAX-FREE CHILDCARE: CONSULTATION ON CHILDCARE ACCOUNT PROVISION Response by the Association of Taxation Technicians

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Introduction

1.1

The Association of Taxation Technicians (ATT) is pleased to have the opportunity to respond to the consultation document Tax-Free Childcare: consultation on childcare account provision (‘the Consultation’) published jointly by H M Treasury (HMT) and HMRC on 23 May 2014.

1.2

HMT and HMRC have requested our views on the options to deliver tax-free childcare accounts in light of the issues and assessment set out in the Consultation. The options put forward are:

1.2.1

Private Sector – one single provider The Government would tender for a single, private sector provider of childcare accounts. That contract would be re-tendered periodically.

1.2.2

Private Sector – small, fixed number of contracts The Government would tender a small, fixed number of contracts (for instance 2 – 5) for entities to become account providers. Those contracts would be re-tendered periodically.

1.2.3

Private Sector – open market Account providers would enter into arrangements with HMRC through a framework procurement. There would be no limit on the number of providers that could enter the marketplace.

1.2.4

Public Sector – Government provider Childcare accounts would be provided by the Government, either though NS&I using its existing banking infrastructure and service capabilities, or within HMRC.

1.3

The ATT believes that the provision of tax-free childcare accounts should be made through just one provider and our strong preference for reasons of security and overall efficiency is for that provider to be in the public sector. Therefore, the option outlined at 1.2.4 above would be, in our opinion, the best option.

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Freedom of choice in pensions: ATT comments

27 June 2014

Furthermore, we believe that using NS&I, with HMRC’s involvement (figure 4.B in the Consultation), is going to be a more transparent and efficient route than HMRC administering the entire scheme itself. The Government has set out the following criteria against which each of the options are to be assessed: Simple, Efficient, Competitive, Secure and Responsive. We provide our reasons in support of our preferred option in section 2 against each of the above five criteria.

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Our views

2.1

Simple The NS&I option will keep the process of using childcare accounts simple for busy families. If too much choice is provided, say in the form of multiple providers, then parents may well struggle over how best to choose an account provider. The option of having a Governmentbacked account removes the need for parents to have to make a choice. Whilst choice in other areas may be welcomed, we do believe that in this instance it would just be another ‘headache’ that parents could do without and they would actually find it a relief not to have to choose. This option will also keep things simple for the childcare providers, who only have to register with and accept payments from one source, NS&I, rather than perhaps a number of account providers, depending on who their clients decided to choose.

2.2

Efficient The use of NS&I’s existing banking infrastructure is a good reason for using this route as it would save the cost of having to create these systems either within HMRC or within one or more private sector providers. It should also, we think, significantly reduce the amount of time and investment needed to ensure that the tax-free childcare system is ready to go by the promised delivery date of Autumn 2015. As the first consultation on this issue highlighted, it is of extreme importance that the system is delivered as soon as possible and that when it is delivered it is as complete and robust as it needs to be, so as to avoid ‘teething problems’ which inevitably put people off joining schemes like this. Using the NS&I and GOV.UK, where the infrastructure already exists, should ensure that only the minimum amount of extra work is required (when compared to the other options) to get the systems to the point they are ready to be used. The fact that childcare providers will only have to register with NS&I should minimise their administrative costs.

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Freedom of choice in pensions: ATT comments

27 June 2014

We are pleased that the Government has also stated that regardless of who eventually provides the accounts, parents will not have to pay any costs. 2.3

Competitive The NS&I option does not bring competitiveness into the issue at all, and we feel that this is how it should be. As we have outlined at 2.1 above, we do not feel that this is an issue where parents would wish to seek a competitive edge by taking time to seek out the best ‘deal’. We believe that parents just want a reliable and secure system with a contact point that remains the same where they can obtain the correct information and advice, as well as manage their account. In our opinion, this is not an area where we should welcome private companies trying to make money out of parents and bombarding them with confusing and perhaps contradictory advice. This would perhaps drive many people to simply not join the scheme at all.

2.4

Secure Some people are very wary of new bank accounts and investment deals, perhaps especially the type of person qualifying for tax-free childcare. They would have comfort in dealing with the NS&I. Protection of parents’ money in the accounts and their personal data will be critical to the success of the scheme and the combined use of NS&I and HMRC should be the best way to ensure that. Having just one provider would also keep the whole system under control and we feel it would be much less open to fraud and abuse than the other options put forward. The risk of fraudulent accounts being opened, or even fraudulent account providers being set up, should certainly be minimised under a single public body provider.

2.5

Responsive The ability to manage the childcare account online via GOV.UK fits in with modern life and how many people do their banking today. However, consideration does need to be given to people who are digitally excluded so that they still have options to manage their accounts and are not prevented for taking part in this scheme. We note that an SMS and telephone system has been mentioned as an alternative to the online system. However, we urge HMT and HMRC to also provide the ability to open an account in writing, and manage their account via correspondence through the postal system, so as to truly represent those that are not just digitally but electronically excluded, ie unable to use a telephone perhaps due to a disability.

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Freedom of choice in pensions: ATT comments

27 June 2014

With just one provider, the information regarding the scheme will be created, updated and issued by one source only. This will provide parents will a definitive contact where they can access this information and be sure that it is correct and consistent. If multiple providers of the accounts were used, there would be a concern that, with many parties providing and disseminating the information, parents could end up receiving contradictory or misleading advice. This could in turn lead to confusion and disillusionment with the whole system.

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Summary

3.1

We have outlined in our response the reasons why we believe that providing the childcare accounts via NS&I, with HMRC’s involvement and the use of GOV.UK is the best option all round. It meets nearly all of the assessment criteria, with the exception of being ‘competitive’. We have outlined why, in our opinion, that assessment criterion should not be applied to the provision of tax-free childcare accounts. We note that in the document entitled Delivery of Tax-Free Childcare: the Government’s response to the consultation on design and operation, issued jointly by HMT and HMRC on 18 March 2014, it was stated on page 33, paragraph 3.22 that ‘the Government has therefore decided that NS&I will be HMRC’s delivery partner for the account provision’. We agreed with the reasons provided for this decision in paragraphs 3.23 through to 3.28 and so we were surprised that this further consultation was issued, especially given the relatively short delivery deadline. We trust that HMRC and HMT can now move forward with the Tax-Free Childcare scheme and ensure it is available for use in Autumn 2015.

3.2

Contact details: Should you wish to discuss any aspect of these comments, please contact our relevant Technical Officer, Alison Ward, on 07762 947 910 or at [email protected].

Yours sincerely

Paul Hill Chairman, ATT Technical Steering Group

P/ATTTSG/Submissions/2014

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Freedom of choice in pensions: ATT comments

27 June 2014

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Note

4.1

The Association is a charity and the leading professional body for those providing UK tax compliance services. Our primary charitable objective is to promote education and the study of tax administration and practice. One of our key aims is to provide an appropriate qualification for individuals who undertake tax compliance work. Drawing on our members' practical experience and knowledge, we contribute to consultations on the development of the UK tax system and seek to ensure that, for the general public, it is workable and as fair as possible. Our members are qualified by examination and practical experience. They commit to the highest standards of professional conduct and ensure that their tax knowledge is constantly kept up to date. Members may be found in private practice, commerce and industry, government and academia. The Association has over 7,500 members and Fellows together with over 5,000 students. Members and Fellows use the practising title of 'Taxation Technician' or ‘Taxation Technician (Fellow)’ and the designatory letters 'ATT' and 'ATT (Fellow)' respectively.

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