This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Employment Income Manual

Benefits: Exemptions: Workplace nurseries from 6 April 2005: responsibility for financing and managing the provision of childcare

Section 318(7)(c) ITEPA 2003

Responsibility for financing the provision of childcare

The “responsibility for finance” test for jointly run workplace nurseries (see EIM22004) requires significantly more than merely buying-in places from a commercial nursery, whether on an ad hoc or a more structured basis. There must be some real and substantial commitment to funding the facility and bearing the risks associated with operating a childcare facility.

For example, a commitment may take the form of an agreement to meet a set proportion of the overall cost of providing the care.

In the case of a facility which was newly established or of doubtful financial viability the commitment may take the form of a long term undertaking to pay a fixed periodical contribution (possibly expressed as the price of a given number of places) where that contribution is calculated to ensure overall financial viability.

Arrangements in which the employer’s participation in financing is little more than a token gesture, purporting to meet the statutory test but without real responsibility falling on the employer, do not meet the statutory test.

Responsibility for managing the provision of childcare

The “responsibility for management” test for jointly run workplace nurseries (see EIM22004) does not necessarily mean day-to-day management or direct responsibility for the care of the children. But it requires more than simply giving advice or being consulted from time to time about the broad policies. 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 is not sufficient. 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.

Top of page


There is a difference in principle between

(1) a commercial nursery business contacting nearby employers as potential customers and establishing arrangements whereby the employer may offer childcare places as a benefit to its employees, and

(2) several employers located in the same general area establishing in partnership a qualifying nursery for the purpose of offer childcare places as a benefit to their respective employees but contracting with a commercial nursery care business for the supply of sufficient qualified carers.

Scenario (1) will not qualify for the workplace nursery exemption even though both scenarios might be portrayed as being, in substance, indistinguishable.