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HMRC internal manual

Employment Income Manual

Vouchers and credit-tokens: childcare vouchers: exemption from 6 April 2005 to 5 April 2011

Section 270A ITEPA 2003 as amended by section 36 FA 2011

For the definition of childcare voucher see EIM16051. For childcare vouchers provided by the employer, if certain conditions are met then from 6 April 2005 to 5 April 2011, the first £55 per week (£50 per week in year 2005-06) of the childcare voucher is exempt. The three conditions are

  • Condition A: child

The child must be either

A child or stepchild of the employee and is maintained (wholly or partly) at the employee’s expense or

Resident with the employee and is a person in respect of whom the employee has parental responsibility (see EIM22025 for more detail).

  • Condition B: qualifying childcare

The childcare provided must be qualifying childcare (see EIM22030 for more detail).

  • Condition C: availability

The childcare vouchers must be available to either

  • all the employees, or
  • all of the employees at that particular location,

subject to the following exception (see EIM22015 for more detail).

Relevant low-paid employees

Condition C may be regarded as met if the scheme that the employer has in place for providing childcare vouchers does not allow relevant low-paid employees to take part because it involves either

  • relevant salary sacrifice arrangements, or
  • relevant flexible remuneration arrangements.

Both relevant salary sacrifice arrangements and relevant flexible remuneration arrangements involve the employee agreeing to a reduced amount of salary or wages in return for the employer providing childcare vouchers.

Relevant low-paid employees are those for who their salary or wages are at a rate that cannot be reduced because the lower amount would be likely to fall below the national minimum wage.

The maximum of the childcare voucher that can be exempt is £55 for each qualifying week (£50 per week in year 2005-06).A qualifying week is a tax week in which a qualifying childcare voucher is received. The definition of tax week is to be found at EIM22011.

An employee is only entitled to one exempt amount per week even if they have two or more children receiving childcare. However, if two employees have responsibility for the same child each employee can receive a weekly exempt amount.

If exemption is claimed by an employee for childcare vouchers then that employee cannot claim exemption under section 318A ITEPA 2003, the other employer supported childcare provisions (see EIM22005).