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HMRC internal manual

Tax Credits Technical Manual

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HM Revenue & Customs
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Entitlement: WTC entitlement: Childcare element: Calculating the average weekly childcare costs

The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002, Reg. 15 (1)

Childcare charges paid weekly

When childcare charges are paid weekly, relevant childcare charges will be calculated by aggregating the average weekly charge paid for each child and rounding up the total to the nearest whole pound.

  • Where the charges are for a fixed weekly amount, then the average weekly charge is established by aggregating the average weekly charge for childcare for each child in the most recent four complete weeks, and dividing by 4.
  • Where the charges are for variable/fluctuating weekly amounts, then the average weekly charge is established, by aggregating the charges for the previous 52 weeks and dividing the total by 52

Childcare charges paid monthly

The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002, Reg. 15 (2)

  • Where childcare charges are paid monthly, in a fixed monthly amount, the average weekly amount of relevant childcare charges will be calculated by multiplying that amount by 12 and dividing the total by 52
  • If the charges are paid in varying monthly amounts , the average weekly amount of relevant childcare charges will be calculated by aggregating the charges paid over the previous 12 months and dividing the total paid by 52

Childcare charges paid for a fixed period

The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002, Reg. 15 (3)

Where childcare charges are for a fixed period and the start and end dates are known, a calculation can be made by dividing the total costs incurred during the period by the number of weeks in that period. The claimant does not need to call back unless the dates change. The four week run-on would not be applied in these cases.

Example:

A Person only incurs childcare once a year, during the summer holidays. They can claim for their childcare to be paid as and when they need it, in the summer. As the start and end dates are known, the total amount paid is divided by the number of weeks during that period to give the average weekly figure.

Insufficient information to arrive at an average weekly amount

The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002, Reg. 15 (3)

Where no information or insufficient information is available to calculate relevant childcare charges using the above, relevant childcare charges will be the amount estimated by an officer of HM Revenue & Customs in possession of information provided by the person or persons incurring the charges and calculated by any method which in the officer’s opinion is reasonable.

For example, if a claimant has been paying variable amounts of weekly childcare for less than 52 weeks or where the claimant has been paying variable costs for the last 52 weeks but at the point of claim, their costs are to change significantly then it is reasonable to look at what the claimant expects to incur over the next 52 weeks.

A different method of calculating childcare costs would also be required if the claimant pays variable amounts and the requirement for childcare will last for less than a year.

Claimant made an arrangement with childcare provider and has not yet started to pay them

The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002, Reg. 15 (4)

Where the average childcare charges as calculated under TCTM02610, are nil, but a childcare agreement has been entered into and the claimant or partner will incur childcare charges in respect of a child during the period of the award, then the relevant childcare charges will be calculated using a written estimate of the future weekly charges as supplied by the claimant or partner