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HMRC internal manual

Claimant Compliance Manual

Particular aspects: child care - payment of charges - facts to consider and information to request

You will need to consider the following questions:

  • Have the amounts been paid?

Unless an examination is taken up within a very few days of the claim being made, customers should usually have begun to make payments. The statute says that the charges must be paid, so there will be no entitlement if money has not changed or will not change hands. This could happen if, for example, the customer(s) enter into an agreement but never make any payments under it. If the arrangement is genuine it is unlikely that payments will not have been made.

The payment requirement means that payment must change hands. If the customer(s) and the child care provider enter into a mutual agreement to look after each other’s child(ren), so that the customer(s) do not actually pay out any money, there will be no entitlement, but if they actually pay each other then the payment requirement will be satisfied.

If the customer has got into arrears with the childcare provider you need to consider whether they have been paid or are likely to be paid within a reasonable length of time. Any arrears that have actually been paid must be included in the calculation. If the arrears aren’t going to be paid within a reasonable length of time and preferably during the period of the award you should usually exclude them from the calculation. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)  

  • Who paid the charges?

If the charges or part of them were (or will be) in fact paid by a third party who is not one of the customers - e.g. a grandparent or an ex-partner or an outside body who is paying all or part of the charges - there is no entitlement for the charges paid by the third party. If the third party gives the money to the customer who then pays the child care provider then the charges are qualifying charges. If the third party makes the payments direct to the child care provider they are not qualifying charges.

Note: Any childcare costs paid by a third party - for example, a grandparent or ex-partner - and which are reimbursed by the customer are treated as being paid and may be claimed.

If you are satisfied that one or both of the customers paid (or will pay) the charges, are you also satisfied that at least one of them is responsible for the child or children?

Do the amounts paid, as shown in the customer’s bank account, or on any receipts given by the provider, reconcile with the amounts stated in the child care contract? Minor discrepancies or fluctuations will not be unusual, but any substantial differences may indicate that some of the payment relates to something other than child care.

The information you will need to obtain will depend on the particular risks identified, but will typically include:

  • the contract for the provision of child care. You will be able to ask the customer(s) and / or the child care provider for this, and to follow up your request with formal first or third party information notices if it is not supplied
  • a copy of the customer’s bank statements for the account out of which the payments were made. If the customer(s) or provider claims the payments were made by some other means, you should ask for information to support that claim. For example, if payment was made in cash, you will need to establish where the cash came from. You may be able to relate the amounts paid out to regular withdrawals from the customer’s bank account
  • receipts from the provider detailing the amounts paid. Note that absence of receipts will not necessarily indicate that payments were not made, particularly in a longstanding arrangement where the customer(s) and provider may have become more relaxed about the formalities.

In rare cases, you may want to see a copy of the child care provider’s bank account. You are entitled to obtain this information, using the third party information powers at Ss 14, 15 and 16, but you should not normally seek it. You should only consider doing so if you have serious doubts that payments were ever made. Before informally requesting this information you should obtain approval from your manager and retain a copy of the authority in the file. If the provider will not supply a copy of their bank account, and you are considering issuing a formal information notice, you should consult the Compliance, Technical Team (B&C Del), before taking any action.