childcare vouchers during maternity leave

HMRC confirms employers are no longer required to provide childcare vouchers during maternity leave

In March 2016, the Employment Appeal Tribunal (EAT) overturned an Employment Tribunal (ET) decision that it was discriminatory to require employees to suspend their childcare vouchers during maternity leave.

Until this point, the Childcare Voucher Providers Association (CVPA) has recommended that employers follow guidance issued by HMRC in their Employer Helpbook, which stated that “childcare vouchers are an employer provided non-cash benefit”. The helpbook says that “employer provided benefits provided under a contract of employment must continue to be provided whilst an employee is absent from work on maternity leave. This applies even if the employee is getting no pay or only getting SMP”.

In the case of Peninsula Business Services vs Donaldson the EAT found that childcare vouchers had been incorrectly assumed to be a non-cash benefit, and argued that as a ‘salary sacrifice’ benefit childcare vouchers are in fact remuneration, which the law does not require employers to continue to pay.

HMRC has now confirmed, in a letter to the CVPA, that it will be updating its guidance to reflect the findings of this landmark case. In the letter, HMRC explains that the original guidance was published in liaison with the government department sponsoring the relevant legislation at the time. This is now the Department for Business Innovation and Skills (BIS), who have accepted the EAT judgement in full, allowing employers to change their maternity policy with confidence.

HMRC mentions in its letter that the judgement has implications for all non-cash benefits delivered through salary sacrifice arrangements during any type of absence for which statutory pay is available, and goes on to say that “the issues therefore need careful consideration but the intention is to update our guidance as quickly as possible”.

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