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Who's good at maths? Me vs HMRC.


Fordy62

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Hi all,

Some help required from those of you with either experience of HMRC and tax free childcare, or those with a good understanding of maths...

In the tax free childcare scheme, HMRC tops up my account so that one fifth of the total amount has been contributed by them. A similar way of looking at things, is that HMRC pay in 25% of what I do - it's the same calculation!

For example, if i pay in £1000, HMRC top up by £250. Meaning that they've paid in 20% of the total funds of £1250, or they topped up 25% of what I paid in (25% of £1000 is £250).

So, onto the detail....

In late 2017, my automatic HMRC top up stopped occurring. This meant that I needed to apply for compensation for the payments I had continued to make to my child care provider.

Over the course of December to March, I paid my childcare provider £3,385.53.

It's important to note that this is all my money. There's no HMRC top up in that.

I recently received a compensation payment of £677-19.

This is their calculation on what I would have been topped up, had my tax free childcare account been functioning correctly.

I argue that this is wrong.

The £3,385.53 is money paid in entirely by me. They have paid £677.19 on grounds that it's 20% of the total, only it shouldn't be.

It should be 25% of the total - which is £846.38.

Has anyone got experience of this? And would anyone care to tell me I'm not going completely mad?

Needless to say I'm fuming.

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When the HMRC top up stopped did you have to take up the slack, paying the full amount to your childcare provider(s), whereas you would only have paid 80% of the total if the system had been working properly? A quick look at gov.uk suggests that HMRC normally pays part of the childcare cost rather than reimbursing you after you've paid the full whack, but I've no experience of this benefit, so apologies if I'm off the mark here. 

If you did have to "take up the slack" I think HMRC is right: in that case, if the system had been working properly you would not have paid £3,385.53 but £2,708.42, and the £677 would represent 25% of what you had paid.

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1 minute ago, lager loud said:

When the HMRC top up stopped did you have to take up the slack, paying the full amount to your childcare provider(s), whereas you would only have paid 80% of the total if the system had been working properly? A quick look at gov.uk suggests that HMRC normally pays part of the childcare cost rather than reimbursing you after you've paid the full whack, but I've no experience of this benefit, so apologies if I'm off the mark here. 

If you did have to "take up the slack" I think HMRC is right: in that case, if the system had been working properly you would not have paid £3,385.53 but £2,708.42, and the £677 would represent 25% of what you had paid.

Christ. You’re the first person to get it. 

£677 would be right if it had been working. But it wasn’t and I had to pay in full. 

HMRC should be paying 20% of the total after they’ve topped it up. 

Lets use their own example on their website. 

I pay £8, the top up by £2. 

If their top up didn’t work, how much should I be chasing on my £8.

we all know the answer is £2, but if I only chase 20% (£1-60) then I’m out of pocket. 

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58 minutes ago, miser said:

Think you're wrong. HRMC have paid 20% of your outgoings. So now you have paid 80% and HRMC 20% - the 25% you were expecting.

HMRC should be paying 20% of the total in the account after they made their top up. See the example above. 

The 25% calculation is the same thing, but based as a percentage of what I paid in. That makes it more simple. 

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8 minutes ago, Redinthehead said:

I think you’re right but isn’t there a limit per child? Not sure if that plays into it?

Thanks. After the explanations I’ve tried to give people on the hotukdeals forum, it actually means a lot to hear from someone who gets it. 

There is a limit You’re right. But we’re nowhere near it. 

The best way I found to explain was...

the website says that for every £8 you pay in, they’ll pay in £2. 

I’ve paid £3385, without top up. 

Thats 423 lots of £8. 

Therefore I’m entitled to 423 lots of £2, which is well above £677!

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2 minutes ago, Fordy62 said:

Thanks. After the explanations I’ve tried to give people on the hotukdeals forum, it actually means a lot to hear from someone who gets it. 

There is a limit You’re right. But we’re nowhere near it. 

The best way I found to explain was...

the website says that for every £8 you pay in, they’ll pay in £2. 

I’ve paid £3385, without top up. 

Thats 423 lots of £8. 

Therefore I’m entitled to 423 lots of £2, which is well above £677!

But...for the period when they weren't topping up, didn't you pay the whole £10 (times 338.5 using your numbers)? If so, they do just owe you 338.5 lots of £2. HMRC is effectively just paying the £677 later than it should.

On the other hand, if your £3385 only represented 80% of the full cost, then the remaining 20% would be due from HMRC - about £846.

That's what I was trying to get at earlier. Again, apologies if I've misunderstood.

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17 minutes ago, lager loud said:

But...for the period when they weren't topping up, didn't you pay the whole £10 (times 338.5 using your numbers)? If so, they do just owe you 338.5 lots of £2. HMRC is effectively just paying the £677 later than it should.

On the other hand, if your £3385 only represented 80% of the full cost, then the remaining 20% would be due from HMRC - about £846.

That's what I was trying to get at earlier. Again, apologies if I've misunderstood.

No you’ve got it. My payment should only ever be the 80% and they should be compensating with the missing 20% - which ironically is 20% of a number that doesn’t feature anywhere! Which I think is what most people struggle to get!

Another way I’ll be explaining to them tomorrow is...

Their website says I contribute £8 and they’ll contribute £2. 

If I paid in £8 and their top up didn’t work, how much would I be owed? Because by their calculation it’s £1-60, but we all know it’s £2 in reality!

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Fordy, I hope you read this thread before you call. Lager Loud and miser have explained it correctly.

 

If the total amount due to your childcare provider was £3,385.53, then you are liable for 80% of the total and HMRC is liable for 20% of the total.

 

80% of the total is £2708.42

20% of the total is £677.

 

To put it another way, £677 is 25% of your net outgoings (£3385.53 - £677 = £2708.42).

 

In your example in post #9 in this thread, you haven't paid "£8", you have actually paid "£10", and then been reimbursed for £2 (20%).

 

Unless you haven't explained yourself clearly in this thread, HMRC are correct.

 

 

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6 hours ago, ziderheadarmy said:

I still don’t understand why you get help paying for your child care? Can you explain? 

Because everyone does.

Its a little bit like asking “why do people get job seekers allowance when they don’t have a job?”.

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8 hours ago, ziderheadarmy said:

I still don’t understand why you get help paying for your child care? Can you explain? 

Everyone under a certain salary is entitled to this. 

Fordy, I feel for you.  HMRC are impossible to deal with when anything goes wrong.  Their decisions will apparently not be questioned.  

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1 hour ago, ziderheadarmy said:

What’s the threshold? I wasn’t aware of this.

I saved tax by buying the vouchers through the childcare scheme in work which takes the money out your wages pre tax.

That’s the alternative. 

If you pay over £8k a year, then you’re better off with tax free childcare. 

If you pay under £8k a year, you’re better off with childcare vouchers. 

You get childcare vouchers, I get tax free child care. They’re alternatives, but TFC isn’t the best publicised thing in the world ever. 

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On ‎15‎/‎06‎/‎2018 at 02:00, Byrd9999 said:

Fordy, I hope you read this thread before you call. Lager Loud and miser have explained it correctly.

 

If the total amount due to your childcare provider was £3,385.53, then you are liable for 80% of the total and HMRC is liable for 20% of the total.

 

80% of the total is £2708.42

20% of the total is £677.

 

To put it another way, £677 is 25% of your net outgoings (£3385.53 - £677 = £2708.42).

 

In your example in post #9 in this thread, you haven't paid "£8", you have actually paid "£10", and then been reimbursed for £2 (20%).

 

Unless you haven't explained yourself clearly in this thread, HMRC are correct.

 

 

i think this is right too.  Fordy,i think you may be confusing yourself unnecessarily on this one. easiest way I see it is divide sum total into 5 equal shares. you pay 4 of those shares,they pay 1  take £100 total bill for example,,you pay 80,they pay 20. 20 is 25% of 80 but that's not the amount of what THEY are paying,just they percentage of what you are paying.bit irrelevant really

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