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HMRC internal manual

Employment Income Manual

Benefits: exemptions: “other childcare” supported by the employer: rules from 6 April 2005 to 5 April 2011

Section 318A ITEPA 2003

From 6 April 2005 a new exemption from income tax came into force. The exemption applies to registered childcare or approved home-childcare supported by the employer for the benefit of employees. The exemption is limited to the first £55 a week (£50 per week in year 2005-06) of childcare costs. There is a matching exemption from Class 1A NICs in the same amount. If the employer meets childcare costs in excess of £55 per week (£50 per week in year 2005-06) then the excess is subject to income tax and NICs

This measure provides a limited exemption for arrangements under which the employer engages with a commercial nursery or approved child carer to provide care for the children of employees (often referred to as “directly contracted childcare”).

Employees joining employer scheme after 5 April 2011

For those employees who begin to receive the benefit of employer provided directly contracted childcare from 6 April 2011, the amount of the exemption available will depend on the estimate made by the employer at the required time of the relevant earnings amount (see EIM22012).