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HMRC internal manual

VAT Government and Public Bodies

Other local authority activities: welfare: Neighbourhood Nursery Initiative

This is a national programme, managed by the Department for Education (DfE), to extend the availability of nursery provision. Local authorities are obliged to ensure that there is sufficient nursery capacity in their area, although they are not necessarily required to run the nurseries themselves.

Provision often involves nursery schools and there is an expectation that there will be some degree of education. Nevertheless, these pre-school services do not amount to education, which is outside the scope of VAT when provided by a local education authority. Rather it is welfare and exempt when charged for.

The DfE has confirmed that nursery provision by local authorities is made under the same legislative provisions as that made by private nurseries Therefore all charged-for nursery provision by local authorities is exempt.

The initiative involves capital projects to create new nurseries or conversions and upgrades to existing buildings. Adoption of the initiative may breach a local authority’s partial exemption de minimis. If this happens the circumstances should be reported to VAT Supply Team (see VATGPB1600).