TFC31200 | Childcare accounts: recovery of anything other than a recoverable top-up payment

Childcare Payments Act 2014, section 53(10) and (11)

When the debt is for anything other than recoverable top-up payments, HMRC cannot recover more than the ‘relevant percentage’ of the funds in the account. This is relevant percentage is the percentage given by the formula (100 / (100 + R)) x 100, where R is the percentage rate at which top-up payments were made. As top-up payments made by HMRC are at the rate of 25% in most cases, the specified percentage will usually be 80% (see TFC35300 - calculating the top-up element and the maximum amount).

Where the top-up payment is made at a rate other than 25%, the relevant percentage will be different HMRC cannot recover more than the relevant percentage of funds from the childcare account. HMRC cannot recover more than the top-up payment it has paid into the account.

Childcare Payments Act 2014, section 53(12)

When the account provider removes money to discharge a debt, they must also return the corresponding amount of top-up payments to HMRC. However, the corresponding top-up payment will not go towards discharging the debt because it is not the account holder’s money.