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HMRC internal manual

Employment Income Manual

Benefits: Exemptions: Workplace nurseries from 6 April 2005: Condition C

Section 318(6) and 318(7) ITEPA 2003

Condition C

In order for the exemption in respect of the provision for an employee of care for a child to apply, either the premises on which the care is provided must be made available by the scheme employer alone or the partnership requirements must be met.

Meaning of “scheme employer”

For the purpose of section 318, “scheme employer” means the employer operating the scheme under which care is provided.

The scheme employer does not need to be the employer of the employee for whom care for a child in a workplace nursery is being provided.

The distinction between scheme employer and employer of the employee for whom care for a child in a workplace nursery is being provided is made in order to extend the application of the exemption to include co-located individuals working for different employers. For example, two separate NHS Primary Care Trusts may have employees working on the same site. If Trust A is the scheme employer in relation to a workplace nursery operated at that site, the exemption may also apply to employees of Trust B working at that site.

Premises made available by the scheme employer

The employer may utilise part of its existing premises, or may acquire new premises or rent other premises for the purpose of providing childcare for its employees. If premises are made available by the scheme employer alone, subject to the other conditions being met, exemption may be due even if the employer does not have any further involvement in the provision of the childcare; for example, the exemption can apply if the employer contracts with a commercial nursery care business for the supply of sufficient qualified carers.

Partnership requirements

For the exemption to apply there is an alternative to the “employer’s premises” test. The purpose of the alternative is to allow small employers, who might not individually be in a position to make available their own premises, to join together with other employers to finance and manage a childcare facility. Childcare provided under such a joint facility qualifies for exemption if:

  • conditions A, B and D are satisfied,
  • the care is provided under arrangements made by persons who include the scheme employer,
  • the premises on which care is provided are made available by one or more of those persons (see EIM22006), and
  • under the arrangements the scheme employer is wholly or partly responsible for financing and managing the provision of the care (see EIM22007).