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HMRC internal manual

Employment Income Manual

Benefits: exemption for workplace nurseries: premises provided by the employer: conditions to be met to 5 April 2005

Section 318(3) (4) and (6) ITEPA 2003

The exemption for workplace nurseries (see EIM21900) may apply if the childcare is provided on the employer’s premises (see EIM21910).

The employer may utilise part of their existing premises, or may acquire new premises or hire premises on licence (for example a village hall). Where such premises are made available by the employer to provide care for children the exemption will apply if three conditions are met:

  • the child satisfies the conditions in Section 318(3) (see EIM21940)
  • the premises where the care is provided are not used wholly or mainly as a private dwelling (see EIM21945)
  • any registration requirements applying to the premises or the person providing the care are met (see EIM21950).

Note that if premises are made available by the employer alone exemption may be due even if the employer does not have any further involvement in the provision of the childcare. So, the exemption can apply if the day to day care was subcontracted to another person.

Contrived arrangements under which the employer leases an existing nursery and immediately leases it back to the nursery provider will not qualify for exemption.

Remember that before 6 April 2005 the exemption does not apply at all if the care is taxable as earnings within Section 62 ITEPA 2003, for example because the childcare has been paid for out of the employee’s earnings or the childcare represents an application of the employee’s earnings.