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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Benefits: exemptions for certain employer supported childcare from 6 April 2005: summary of the new provisions

Section 318A - 318D ITEPA 2003

The main changes in the exemptions for employer supported childcare from 6 April 2005 are summarised below:

Exemption for “Other Childcare”

A new tax exemption for registered childcare or approved home-childcare (other childcare) on the first £55 a week (£50 per week in year 2005-06) of childcare costs. This applies to childcare bought directly by the employer for the benefit of their employees. There is a matching exemption from Class 1A NICs on the first £55 a week (£50 per week in year 2005-06).

This change gives the limited exemption to arrangements under which the employer engages with a commercial nursery or approved child carer to provide care for the children of employees.

Section 318D and 270A ITEPA 2003

Exemption for “childcare vouchers”

A new tax exemption for childcare vouchers, similarly restricted to registered and approved childcare, covering the first £55 a week (£50 per week in year 2005-06). The Class 1 NICs exemption also applies to the first £55 a week (£50 per week in year 2005-06). See EIM16050 for further guidance.

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Exempt amount for monthly paid employees

Sections 318A - 318D and 270A specify the exempt amount as a weekly value - £55 per week from 6 April 2006. For monthly paid employees this converts to £243 per month (£55 x 53/12).

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Changes from 6 April 2011

For employees who join their employer’s scheme for the provision of childcare on or after 6 April 2011 the exemption may be further restricted (see EIM16053 and EIM22012).