The director of a Limited Company I am working with has been paying weekly childcare costs for her three children through her business and I am not sure how to account for them so that she can benefit from some tax relief. Previously she has been a Director of the business with no salary and paying for her 3 children to have childcare through the business account. As of this month she is going on the payroll and continuing to make the weekly payments through the business for the childcare.
Firstly, how should I account for the historic payments - previously they have been allocated against the Director's Loan Account; can I allocate them differently so that she can get some tax relief? Is she entitled to £55 a week total, or per child? Would any payments in excess of the allowance still be allocated to the Director's Loan Account?
Secondly, going forward, is it OK for her to continue making direct payments from the company's bank account to the organisation, or should she join a childcare voucher scheme? And if joining a scheme is the best option, do I need to make amendments to her payroll profile or can this continue to be dealt with as a business expense. Will there be any P11D implications at the end of this tax year?
FYI we use Free Agent accounting software for her books, so if you are familiar with the software and can offer specific advice on how Free Agent deals with this, that would be great.
