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HMRC internal manual

Employment Income Manual

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

Section 318(8) ITEPA 2003

Condition D

In order for the exemption in respect of the provision for an employee of care for a child to apply, the scheme under which care is provided must be open to the scheme employer’s employees generally or, if the employer has premises at more than one location, the scheme must be open generally to employee’s at the particular location at which the scheme operates.

Nurseries may also be available to other workers on the site such as contractors or employees of other employers who are based at the premises.

The condition is intended to encourage employers to provide childcare for all employees. If the scheme is only available to a particular group of employees - for example, directors or senior managers - this condition will not be met and the value of the benefit will remain liable to income tax and NICs.

Employers may operate on a number of sites but have a workplace nursery at only one of them. If the nursery is available to all employees working at the site where it is located the condition will be satisfied. There is no requirement to provide workplace nurseries at every site.

The rule does not require the employer to provide unlimited nursery places. Places available in workplace nurseries may be limited but an employer’s scheme will not fail to attract exemption simply because there is a waiting list and some employees cannot be catered for at any given time. However, in these circumstances the criteria for awarding places should not be biased in favour of particular groups of employees.

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.