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HMRC internal manual

Tax Credits Technical Manual

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HM Revenue & Customs
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Entitlement: WTC entitlement: Childcare element

Definition of a child for childcare purposes

The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002, Reg. 2 & Reg. 14 (3) & (4)

The childcare element can be paid for any child up to the last day of the week in which falls the 1st September following that child’s 15th birthday: or last day of the week in which falls the 1st September following a child’s 16th birthday if the child is disabled.

A childcare week begins after midnight between Saturday and Sunday and ends at midnight one week later.

A child is treated as disabled for childcare purposes if they have been certified as severely sight impaired or blind by a consultant ophthalmologist, or they have ceased to be certified as severely sight impaired or blind by consultant ophthalmologist within the 28 weeks immediately preceding the date of claim, or if the child is receiving armed forces independent payment, or Disability Living Allowance or Personal Independence Payment (PIP), or DLA/PIP has ceased to be paid solely because the child is a patient.

Eligible childcare and relevant childcare charges

The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002, Reg. 14

Relevant childcare charges are charges incurred and paid by the claimant for childcare provided for any child for which they are responsible.  Relevant charges must not include any element which is covered by way of an Educational or Childcare Grant, salary sacrifice or any similar schemes.  The childcare must be registered or approved.  The childcare costs claimed for the childcare element must not include the value of costs which are met by an employer through a salary sacrifice scheme.  A salary sacrifice for childcare vouchers can reduce the relevant employment income figure for tax credits as the value of these benefits is not included as income.  But any childcare costs declared for the childcare element of WTC would be reduced, as those costs met by the employer are not relevant costs.  If the costs are only partly funded by the employer, then the amount in excess of that can be declared as childcare costs (see TCTM04103 and TCTM04215).  

Where registered or approved childcare is provided by a person working for the claimant as an employee (for example a nanny), the claimant may claim the costs incurred for employing that person.  This may include for example, the gross pay of the employee as well as any employer National Insurance Contributions which the claimant may be liable to pay.

Currently, there is no requirement for the childcare to be provided whilst the claimant is at work.  For example if a claimant works night shifts, and puts their child into registered or approved childcare during the day whilst they sleep, the costs would still be relevant for tax credits purposes.

Relevant childcare charges do not include

  • charges in respect of care provided by a relative wholly or mainly in the child’s home;
  • charges in respect of care provided by a relative approved under the Approval of Child Care Providers (Wales) 2007 Scheme or the Tax Credits (Approval of Home Child Care Providers) Scheme (Northern Ireland) 2006 where the care is usually only provided for the child to whom the provider is related;
  • charges paid in respect of the child’s compulsory education;
  • charges paid by a person to a partner, or by a partner to the person in respect of any child for whom either or any of them is responsible.

Note: A relative means a parent, grandparent, aunt, uncle, brother or sister whether by blood, marriage, civil partnership or affinity.  A partner means a member of a couple making a joint claim.

The Tax Credit (Claims and Notifications) Regulations 2002. Reg. 27

Claimants can notify the commencement of, or change in childcare arrangement up to 7 days in advance of the change occurring.

The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002, Reg. 14

In England only

The childcare must be:

  • ‘registered’ by Ofsted, either in the Early Years Register or in the compulsory or in the voluntary part of the General Childcare Register  
  • ‘registered’ with a  Childminding Agency’ who is registered with Ofsted

Note:

  • Childminding Agencies have the same powers as Ofsted to approve, assure, register and provide general advice to childminders on domestic premises
  • Domestic childminders will have a choice of registering with either Ofsted or a local child-minding agency, but they cannot be registered with both
  • Tuition type childcare that is registered with Ofsted is currently allowable

 

  • provided to a child aged 2, 3 or 4 years old, by a school under the direction of the school’s governing body or an equivalent body, on school premises or premises that may be inspected as part of an inspection of the school by the Chief Inspector
  • out-of-school hours childcare or supervised activity based childcare, provided for a child aged between 5 and 15 years (or 16 if disabled) by a school on the school premises, or premises that may be inspected as part of an inspection of the school by the Chief Inspector or by a childcare provider ‘registered’ by Ofsted
  • a domiciliary care worker or nurse from an agency registered’ under the Domiciliary Care Agencies Regulations 2002 who is providing childcare in the child’s home under the direction of the agency and solely as a result of that family’s illness, disability or infirmity

Note: The Domiciliary Care Agencies Regulations 2002 were repealed in 2008. Transition regulations allows the Decision Maker to continue to use these regulations even though in reality carers will have to comply with the new Health and Social Care Act 2008 (Regulated Activities) Regulations 2014.

  • provided by a carer who is provided by a service provider within the meaning of the Health and Social Care Act 2008, Regulations 2014, in relation to the regulated activity of personal care within paragraph 1 of Schedule 1, or nursing care that is provided in the child’s own home within the meaning of paragraph 13 of Schedule 1. This means that the care being provided has to be registered with the Care Quality Commission and the care must comply with the requirements of registration

In Wales only

A childcare provider must be:

  • registered by the National Assembly for Wales through the Care and Social Services Inspectorate for Wales (CSSIW),
  • a school that provides childcare outside of school hours and on school premises or a local authority that provides childcare outside of school hours,
  • a domiciliary care worker or nurse from an agency registered under the Domiciliary Care Agencies (Wales) Regulations 2004 who is providing childcare in the child’s home under the direction of the agency and solely as a result of that illness, disability or infirmity,
  • someone approved by the Approval of Childcare Providers (Wales) 2007 scheme providing childcare in the child’s home or if several children are being looked after, in one of the children’s home, or
  • approved foster carers if childcare is for a child aged 8 or over and takes place outside of the child’s home or for a child aged 16.  Otherwise the foster carer must also register under one of the provisions above.  The child must not be their foster child.

In Scotland only

A childcare provider must be:

  • a childcare provider ‘registered’ with the Social Care and Social Work Improvement Scotland (SCSWIS),
  • out-of-school-hours childcare clubs ‘registered’ with the SCSWIS, or
  • childcare provided in the child’s home by, or introduced through childcare agencies, sitter services and nanny agencies which are required to be ‘registered’.

Note: Someone using a foster carer to look after the child, can be eligible for childcare support in tax credits if the foster carer, like any other childcare provider, is registered with the Social Care and Social Work Improvement Scotland

In Northern Ireland only

A childcare provider must be:

  • Registered with The Health and Social Services Trust
  • A school that provides out of school hours childcare on school premises or by an Education and Library Board that provides out of school childcare
  • Registered with the Approval of Home Childcare Provider (Northern Ireland) 2006 Scheme, providing childcare in the child’s home, or
  • An approved foster carer if the childcare is for a child aged 12 or over and takes place outside of the child’s home or for a child aged 16.  Otherwise the foster carer must register under one of the provisions above.  The child must not be their foster child.

 

The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002, Reg. 14(2)(d)

Childcare provided outside the UK must be provided under a Ministry of Defence accreditation scheme abroad.

Residential Boarding Schools

The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002, Reg. 14 (1), (2) and (5)

A person who is incurring and paying relevant childcare charges for a child in a residential boarding school, may be entitled to claim childcare costs providing that the school meets the conditions and those costs do not include any element for compulsory education.

Example 1:

A school charges £7,000 per year for compulsory education, and £1,500 per year for boarding which is provided as an option. The school provides an itemised invoice to show the £1,500 boarding fees. If the claimant has chosen to pay for the additional fees for boarding, the childcare costs would be considered as relevant for tax credit purposes.

Example 2:

A school charges £8,000 per year for compulsory education, and breakfast and after school clubs. The fees are the same whether the child attends these clubs or not. The invoice shows that the fees for the clubs are £2,000 per year. As all parents are charged the same whether or not their child attends the clubs, the costs are not allowable.