Dan Norris reviews the main rules on childcare costs in universal credit.
The cost of childcare is often cited as a significant obstacle to parents working or taking on more work. Universal credit (UC) includes a childcare costs element as part of the UC maximum amount, aimed at enabling paid work.
Relevant rules are set out in regulations 31 to 36 of the Universal Credit Regulations 2013 (SI No.376) and the relevant guidance for decision makers can be found in chapter F7 of Advice for Decision Making.
Claimants must be in paid work
In general, only working single claimants or couples where both partners work (including temporary breaks from work in some cases), and claimants with an offer of work which is due to start in the current or next assessment period, are eligible for the childcare costs element.1
Claimants on statutory sick pay, maternity pay, paternity pay, shared parental pay or adoption pay or maternity allowance are treated as being in paid work. Claimants who have ceased paid work in the current or previous assessment periods are also treated as being in paid work. Additionally, during the first and second assessment period of their UC award, claimants who ceased paid work in the month immediately prior to the start of a UC award are treated as being in paid work.2
Couples where one partner works and the other has a limited capability for work, has regular and substantial caring responsibilities or is temporarily absent from home are also eligible to receive the child care costs element, if all other qualifying conditions are met.3
The amount of childcare costs element
The maximum amount of the childcare costs element is the lesser of 85 percent4 of the actual costs that are attributable to the assessment period, or £646.35 (for one child) or £1,108.04 (for two or more children) per assessment period.
There is no minimum number of hours a claimant must be working. This a marked difference from childcare costs in working tax credit.
However the DWP may restrict the amount of childcare costs element if the bill is deemed ‘excessive’.5 This term is not defined in legislation but decision makers should have regard to the amount of childcare needed in order for the parent to work and to travel to and from his/her workplace and the childcare venue. The hourly costs of childcare should not influence the decision as to whether costs are ‘excessive’ (although the amounts are subject to limits – see above) and account should be taken of extra amounts of childcare needed for parents to work during school holidays or because the child has a disability.6
Childcare costs covered by a third party (including employers or the Secretary of State or Scottish or Welsh ministers in connection with work-related requirements or training) cannot be included in the calculation of the childcare costs element.7 Childcare provided by a close relative of the child (rather than the claimant) or the child’s foster parent is also excluded.
Unsurprisingly, only costs paid in respect of ‘relevant childcare’ for a child or a qualifying young person who has yet to reach 1 September after her/his 16th birthday and for whom the claimant is responsible8 can be included in the calculation of the childcare costs element.
‘Relevant childcare’ includes: in England, childcare providers registered with Ofsted under the Childcare Act 2006; in Scotland, those providers registered under Public Services Reform (Scotland) Act 2010; and in Wales, childminders and day-care providers registered under Part 2 of the Children and Families (Wales) Measure 2010.9
Reporting childcare costs – full service areas
In full service areas claimants must report to the DWP that they have paid for childcare costs before the end of the assessment period which the costs are ‘attributable to’, in order for childcare costs to be automatically included in their UC award for that assessment period (note: this is a UC ‘full service’ rule – ie, with national application for the full roll-out of the full service).
The DWP may allow claimants to report childcare after the assessment period to which the costs are attributable if the requirements for late reporting of a change of circumstances set out in regulation 36 of the Universal Credit, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support Allowance (Decisions and Appeals) Regulations 2013 (SI No.381) are met.10 In practice, the claimant must demonstrate that it is reasonable to accept a late report and that ‘special circumstances’ meant it was not practical to report payment of the childcare costs before the assessment to which the childcare costs are attributable; the report must be submitted no later than 13 months after the end of this assessment period.11
Childcare costs are attributable to the assessment period in which:
- the childcare was both paid for and provided; or
- the assessment period in which childcare was provided if the bill was paid in advance during either of the two prior assessment periods;
- the assessment period in which the childcare bill was paid if the childcare was provided in any previous assessment period.
If childcare is provided or paid for before the start of a UC claim, months before the claim began are notionally treated as assessment periods (with the same start and end dates as in-claim assessment periods) and entitlement to the childcare costs element calculated in accordance with the rules set out above.12
These rules have caused several problems, as reported to CPAG’s Early Warning System.
- The childcare costs element can only be added to a claimant’s entitlement after s/he has paid the bill. This represents a considerable liability for claimants who may be forced into debt or are simply unable to pay for childcare and start work.
- Childcare costs paid in arrears are attributable to the assessment period in which the bill was paid. Claimants should be aware that arrears payments such as these (which may be substantial) are subject to the maximum amounts set out above.
- Claimants who pay in advance will not receive the childcare costs element until the end of the assessment period in which the childcare is provided, and then only in respect of the proportion of the bill for which the childcare was provided in that assessment period.13 This means that claimants may have to wait up to three months for the support available to meet the childcare bill before they paid in full.
- Furthermore, the costs of childcare provided more than two assessment periods after the period in which the bill is paid will not be included in the calculation of the childcare element at all, in any period.
- To be automatically entitled to the childcare costs element in respect of a childcare bill, the claimant must report the payment before the end of the assessment period to which the childcare is attributable. If payment is made late in the assessment period, parents will have limited time to report this to the DWP and ensure the costs are included in calculation of their UC entitlement.
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- 1. Reg 32(1) UC Regs 2013, No.376
- 2. Reg 32(2)(a) UC Regs 2013, No.376
- 3. Reg 32(2)(b) UC Regs 2013, No.376
- 4. Increased from 70 per cent with effect from 11 April 2016.
- 5. 5 Reg 34(1)(a) UC Regs 2013, No.376
- 6. See paras F7081 to F7086 of the DWP’s Advice for Decision Making
- 7. Reg 35 UC Regs 2013, No.376
- 8. Regs 2, 4 and 4A UC Regs 2013, No.376
- 9. A complete definition of ‘relevant childcare’ can be found on p69 of the 2018-19 edition of CPAG’s Welfare Benefits and Tax Credits Handbook.
- 10. Reg 36 UC, PIP, JSA, ESA (Decisions and Appeals) Regulations 2013, No.381
- 11. Reg 363(2) UC Regs 2013, No.376
- 12. Reg 34A(3) UC Regs 2013, No.376
- 13. Reg 34A UC Regs 2013, No.376