BIM52751 - Care providers: childminders: expenses
You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.
Childminders work in their own homes and are paid by parents for looking after their children, often while the parents are at work. Profits from childminding are usually chargeable to Income Tax as trade profits, although some occasional childminders’ profits may be chargeable as miscellaneous income.
Many childminders are members of the Professional Association for Childcare and Early Years (PACEY), formerly known as the National Childminding Association (NCMA). HMRC entered into an agreement with the NCMA on the expenses that will be allowed as deductions from childminding income.
Childminders, whether members of PACEY or not, may calculate their expenses using the NCMA/HMRC agreement. Their statutory rights are not affected by the agreement. Childminders may calculate their profits on the normal basis if they wish to do so. And from April 2013, the simplified expenses rules offer a further alternative method of calculating certain expenses (see BIM75000 onwards).
In calculating any taxable profits, HMRC allow as deductions from childminding income expenses which are reasonable in amount and which are directly attributable to childminding. The cash book and attendance register produced by PACEY provides an acceptable way of recording income and outgoings. Receipts are not required for items costing less than £10. Receipts are required if a number of smaller items are purchased at one time and the total cost is £10 or more.
The agreement is based on the hours that childminders work and not on the number of children they care for. A childminder looking after a child on a full time basis for 40 or more hours each week is entitled to claim the full time proportion of expenses.
How this works is illustrated in the following table:
|Hours worked||% of Heating and lighting costs||% of Water rates, Council Tax and Rent|
|40 (full time)||33%||10%|
The full time figures shown in the table should be scaled down from depending on hours worked.
Wear and tear of household furnishings
A deduction of 10% of total childminding income may be made to cover the wear and tear of furniture and household items. This is intended to include household items which are not used wholly and exclusively in childminding. A childminder claiming this deduction may not, however, claim relief for the cost of replacing such household items. Reasonable costs of cleaning household items where the need for cleaning is as a result of childminding activities may be allowed as a separate item.
The agreement also covers the following expenditure:
Food and drink
Reasonable estimates for the costs of food and drink provided for the children being cared for are acceptable and receipts are not required.
Where appropriate, childminders can use the simplified expenses mileage rates. However, if the childminder wishes, the actual cost of car expenses for childminding purposes can be claimed instead.
Also allowable - the cost of toys, outings, books, safety equipment, stationery, travel fares, membership fees or subscriptions to your childminding organisation, public liability insurance premiums and the actual cost of telephone use for childminding purposes.
Grants received by childminders to help them to start up their businesses or to meet capital or running costs should be dealt with following normal principles, see BIM40450 onwards. If a grant is received before the business begins to trade, it is not a trade receipt. A start up grant may reduce the amount of pre-trading expenditure on which relief is available, see BIM46355.