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Just 160,000 families use Tax-Free Childcare as technical problems persist

By Rachel Lawler
Tax Free Childcare boy PC
Just 160,000 families are benefitting from the government’s Tax-Free Childcare scheme, according to statistics revealed today.
The news comes as childcare providers have reported problems receiving payments from parents through the scheme.
Technical issues
When Tax-Free Childcare launched, the government estimated that 415,000 families would be benefitting from the scheme by the end of December 2017.  But the scheme struggled with technical issues and its full rollout was delayed until March 2018.
Today, providers are reporting technical problems receiving payments, following an upgrade designed to make the system faster. The glitch has left providers unable to tell which parents had made payments using the system.
When contacted by the Alliance, the HMRC could not reveal how many providers had been affected and a spokesperson said: “We apologise for the inconvenience caused by this issue with payment references. We are working hard to resolve it and if parents or childcare providers have problems, they can call us on 0300 123 4097 and we will help them.”
This latest glitch will be hugely concerning to providers, some of whom receive tens of thousands of pounds of payments via the Tax-Free Childcare portal, and will leave those affected facing a significant administrative task to reconcile these anonymised payments with parents. 

This is just the latest in a long line of technical issues that have dogged Tax-Free Childcare since its 2017 launch, including glitches which led to providers not being paid in November last year. Following last year’s Budget, the government revealed that poor take up of the offer had meant the policy had an underspend of £600m, money which was returned to the Treasury. 

Underspend reallocated
Neil Leitch, chief executive of the Alliance, has called for the underspend on Tax-Free Childcare to be reallocated to support the government’s funded childcare offers.
Neil said: “We warned Tax-free childcare was a regressive policy from the outset because it meant parents with more disposable income received more financial support from government than those with less. The worryingly low take up of Tax-Free childcare seems to show these fears have now been realised. 

“It now seems inevitable that there will be yet another underspend on this failing government policy. It’s imperative that any Tax-free Childcare surplus finds its way to the families and providers currently subsidising the £662 million shortfall in the government’s early years funding, rather than being pocketed by the Treasury – something that simply cannot happen again.” 

Additional admin
Neil added that this latest technical glitch was unacceptable following the earlier problems with the service. He said: “This latest change to the payment system seems to have taken place without communication, consultation or testing with the sector. Given the HMRC’s track record of technical problems, this is not good enough. There’s no doubt this will have caused an additional, significant administrative burden for providers at a time when they are preparing for the new term.”
HMRC has confirmed that the issue with Tax-Free Childcare payments has now been resolved. All providers who received payments with incorrect references will be contacted with with the correct references.
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