TFC31100 - Childcare accounts: recovery of debts from a childcare account

HMRC has the power to recover debts arising under the Act directly from childcare accounts. There are different rules depending on whether the debt is in respect of recoverable top-up payments, other debts, or a combination of both.

Childcare Payments Act 2014, section 53(1)

For HMRC to be able to recover a debt from a childcare account, the account holder must owe money because of something they did, or did not do, in connection with a childcare account that is held for the same child and the some or all of the debt must not have been paid by the time it is due (see TFC55200 - time limits to make an assessment and pay the assessed amount).

Childcare Payments Act 2014, section 53(2) and (3)

HMRC may direct the account provider to pay a specified amount from the account to HMRC to discharge the whole or part of the relevant debt. Where HMRC issues such a direction, the account provider must comply with the direction.

Childcare Payments Act 2014, section 53(5)

When a debt has arisen because of HMRC recovering top-up payments from the account holder, HMRC can only recover the debt from the childcare account if the childcare account is not active when HMRC makes the direction.

Childcare Payments Act 2014, section 53(6)

When the account provider removes the money from the account, they must also pay the account holder the ‘appropriate qualifying amount’.

Childcare Payments Act 2014, section 53(7)

This is the amount of money which, if paid into a childcare account, would entitle the account holder to a top-up payment equal to the debt or if that amount is greater than the top-up element of the funds held in the account, the top-up element of those funds.

Childcare Payments Act 2014, section 53(8)

If the amount of debt is greater than the top-up element the difference is to be deducted from the appropriate qualifying amount by the account provider and paid to HMRC.