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HMRC internal manual

Employment Income Manual

Benefits: exemption for workplace nurseries: responsibility for management: to 5 April 2005

Section 318(7)(c) ITEPA 2003

The “responsibility for management” test for jointly run workplace nurseries (see EIM21920) requires more than simply giving advice or being consulted from time to time.

It does not necessarily mean day-to-day management or direct responsibility for the care of the children. But it does mean much more than being occasionally consulted about the broad policies which should apply to the provision of the care or having a right to a place on a committee which has no particular brief and little or no power to influence the way in which the care is provided. It requires close involvement in such matters as:

  • appointing and monitoring the performance of those engaged to look after the children
  • the extent of the care provided
  • the conditions under which that care is provided and
  • the allocation of places.

Employers must, in a real sense, play a part in management. Arrangements in which the employer’s participation in management is little more than a token gesture, purporting to meet the statutory test but without real responsibility falling on the employer, will not meet the test. Where an employee with a child at a nursery is appointed to the management board of that nursery as agent of the employer we will expect to see evidence that the employee is fully empowered to act for the employer and does so.

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.