Firms and workers could be forced to pay back thousands of pounds after wrongly taking advantage of childcare tax breaks.
Accountants say confusion over HMRC rules means some parents have wrongly benefited from reductions in the cost of workplace nurseries.
Parents can save thousands of pounds by paying fees for workplace nursery schemes through their salary before their wages are taxed.
However, a growing number of companies have started to offer childcare schemes that do not qualify for these tax savings.
The Association of Taxation Technicians (ATT) has urged HMRC to clarify the rules in order to end the ongoing confusion.
Senga Prior, of the ATT, said: “We are urging HMRC to be more proactive in clarifying what schemes do and do not qualify – such as issuing some focused guidance or publicity on what employers and employees should think about, and what questions they should ask, before becoming involved in these schemes.”
A scheme is only likely to qualify if the employer runs an onsite nursery. If an employer offers the scheme in partnership with a third party, the scheme is unlikely to be eligible unless the employer is responsible for financing and managing the nursery.
Some companies may contribute to fixed costs of the nursery in order to qualify, but HMRC has said this does not make the scheme eligible for the tax break.
Matt Crawford, of accountancy firm Blick Rothenberg, told the Telegraph he was aware of one business that has paid money to the HMRC following an investigation.
He said: “The costs of settling can be pretty huge as it multiplies up so fast. For every £1 you spend on nursery places for your staff, the amount of tax to pay to settle can easily be over £1 on top of that once you factor in interest, potential penalties and a gross-up to cover the employees’ taxes.”
Worryingly, accountants have warned that parents could end up paying the unpaid tax themselves in some scenarios, for instance, if their employer’s business went under.
However, Mr Crawford said it was unlikely employers would refuse to settle on workers’ behalf, as it could open them up to claims for misrepresentation.
If an employer had 20 workers involved in the scheme, each with nursery fees of £7,500 annually, then the liability for the employer could amount to £58,000 for just one year, according to accountancy firm RSM.
Susan Ball, of RSM, said: “If HMRC successfully challenges an arrangement that has been treated as exempt in the past, and concludes that the exemption does not apply, it could go back six tax years to collect the underpaid (tax), and charge late payment interest and penalties.”
HMRC said the rules are clear and it keeps its guidance regularly updated.
A spokesman said: “Where an employer provides a non-cash benefit to an employee, that benefit in kind is taxable.
“For childcare, where an employer arranges with a commercial provider to provide childcare for employees’ children or provides childcare vouchers for the employee to use, that is a taxable benefit in kind.
“Where an employer provides a workplace nursery, that may be exempt from tax and National Insurance where certain conditions are met.”
