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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Vouchers and credit-tokens: childcare vouchers: example: employee in employer’s scheme before 6 April 2011

Section 270A ITEPA 2003

Example: Paul and Charlotte, aged 3 and 6 respectively, live with their grandmother, in the week and their father alternative weekends. Their mother died 2 years ago. The father pays £120 per week to the children’s grandmother for their maintenance. Paul goes to a registered childminder 5 mornings a week. Paul’s grandmother pays the childminder £60 a week using childcare vouchers, which her employer has been providing as part of her remuneration continuously since June 2010. The grandmother does not know about the salary arrangements for the other 20 people who work in her office. Charlotte sometimes attends an out of school club, which costs her grandmother £8 a session.

Answer:

  • The father is not eligible for exemption, as his employer does not provide either type of childcare.
  • As the grandmother’s employer provides childcare vouchers, which are used to pay the childminder, exemption may be available for these providing all of the following conditions are met:

Condition A - child : As the grandmother has parental responsibility for Paul and he lives with her, this condition is met.

Condition B - qualifying childcare: As the childminder is registered, this condition is met.

Condition C - availability: It will need to be checked whether the choice of receiving childcare vouchers is available to all of the grandmother’s colleagues at work (subject to the possible exception of relevant low-paid employees - see EIM16052). If it is then this condition is met.

Condition D - relevant earnings amount: As the grandmother was receiving childcare vouchers before 6 April 2011, this condition does not apply.

  • The limit of the exemption is £55 per week. The value of the childcare vouchers provided is £60 so the excess of £5 per week is chargeable to tax as employment income. Exemption is not available for amount the grandmother pays to the out of school club because this is not employer-supported childcare. Also exemption cannot be claimed for both childcare vouchers and childcare provision. (See EIM16054)