Childcare Affordability Programme (CAP)

Nine out of ten families with children are entitled to Tax Credits. One tax credit available is the Child Tax Credit. To be eligible for the Child Tax Credit you must:

• Aged 16 or over and usually live in the United Kingdom.

However you may also qualify if you don’t live in the UK but are:

• A citizen of another country in the European Economic Area (EEA) and you work in the United Kingdom, or
• A Crown Servant posted overseas, or
• A citizen of a country in the European Economic Area (including the UK) living abroad and you receive a UK state pension or contributions-based Jobseeker's Allowance.

Child Tax Credit is for people who are responsible for at least one child or qualifying young person. Child Tax Credit is paid direct to the person who is mainly responsible for caring for the child or children. If you are a lone parent you will receive the payment. Child Tax Credit can be paid to workers who continue to pay UK National Insurance Contributions when posted from the UK to work in another country in the European Economic Area.

Are you eligible to benefit from the Childcare Affordability Programme?

The CAP is designed to make childcare more affordable and assist parents who are looking to remain in, or enter employment.

The key objectives of CAP are to:

• Make childcare in London more affordable for low income parents;
• Enable parents on low incomes in London to stay in, or return to, full or part-time work and flexible work; and
• Provide parents with greater access, choice and flexibility in childcare at greater quality.

Who are eligible to benefit from the CAP?

Parents and Children
• Parents taking up both full day and flexible childcare places must be in receipt of the Child Tax Credit at a higher rate than the family element (for 2006/07 this means that the parent must be receipt of MORE than £547.50 a year in Child Tax Credit)
• Children must be aged 0 – 5 years (before statutory school age)
• Parents must be able and willing to provide their annual Child Tax Credit award to a provider and allow them to take a copy of the front page of the Tax Credit award letter from Her Majesty’s Revenue & Customs (HMRC). An example of an award letter is in Annex 5.
• Parents will need to be able to provide evidence of the identity and date of birth of their child.

What are the benefits for parents?

Parents and children benefiting from CAP subsidised childcare places, will be able to access more affordable and flexible childcare places in their area, enabling them to go back to work, extend their existing working hours, or improve their work life balance.

Frequently Asked Questions

1. If a parent receives childcare vouchers from their workplace, will it affect their tax credits and eligibility for CAP?

Accepting childcare vouchers – if they are additional to salary – can adversely affect whether a parent is eligible to receive the child tax credit at a higher rate than the family element. It depends, however, on how much they earn and what type of voucher is offered. We would recommend:
• Parents should check with their employer the nature of the voucher scheme – in particular if it is voucher is in addition to salary or if it is deducted from salary.
• They should then contact the Inland Revenue Tax Credit helpline (0845 300 3900) to determine if accepting the employer voucher will reduce their child tax credit to less than the family element.
• If, by accepting the vouchers, the parent’s child tax credit reduces to less than the family element, they will be ineligible for the CAP subsidised place.
• If, by accepting the vouchers, the parent is still eligible to receive child tax credit at a higher rate than the family element, that parent will be eligible for the CAP subsidised place. In this case, the employer voucher should be deducted from the £175 cost of the subsidised CAP childcare place (thereby further reducing the cost to the parent).
2. If parents do not have a tax credit award letter how will they prove that they are in the target group for the CAP?

In order to receive the CAP subsidy providers will need to have evidence that the parent is in receipt of the Child Tax Credit at a higher rate than the family element. Parents can only apply for the place by providing the provider with the Tax Credit Award letter.

In the summary box on the first page of the grant award letter there is a number next to ‘Child Tax Credit’. This is the number that providers will look at to check that parents are in receipt of more than £547.50 per year (for 2006/7).

If providers are reassured that the parents accessing the place are likely to be eligible for the Child Tax Credit at a higher rate than the family element then it is at the providers discretion whether they offer the parents a place. The provider will need to verify that the parent is in receipt of the Child Tax Credit at the end of the each quarter on the monitoring form.

Providers can advise parents to use the application form on the Inland Revenue website to check eligibility. This will provide them with a page indicating whether or not they are eligible for funding. https://www.taxcredits.inlandrevenue.gov.uk/Qualify/DIQHousehold.aspx

Working Tax Credit/Child Tax Credit Helpline
Inland Revenue - open from 8am - 8pm seven days a week
0845 300 3900 (textphone 0845 300 3909 )
http://www.hmrc.gov.uk/taxcredits/downtime.htm