Childcare and workplace nurseries

Produced by Tolley in association with Philip Rutherford
Childcare and workplace nurseries

The following Employment Tax guidance note Produced by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Childcare and workplace nurseries
  • Introduction
  • Workplace nurseries
  • Other childcare
  • Salary sacrifice
  • Reporting requirements ― employer
  • Childcare provision by the employer outside of the complete and limited exemptions
  • ‘Tax-free’ childcare (2017 onwards)
  • Eligibility
  • Childcare accounts
  • More...


A number of employers will provide workplace nursery facilities for their employees. The provision of childcare benefits affords some potentially large tax savings as it allows all or part of the childcare costs to be funded by the employer free of income tax and NIC. Broadly speaking, the legislation covers two forms of exemption: childcare provided at the workplace and other childcare.

The various exemptions are found at ITEPA 2003, s 318 onwards.

From 6 April 2017, there have been significant changes to the operation of tax efficient childcare. While many of the historic arrangements continue, there are transitional arrangements for childcare vouchers which will close to new entrants on 4 October 2018. It is worth noting that the administration of many of the tax efficient schemes will be through public agencies rather than through employers.

Workplace nurseries

Where specific criteria are met, the provision of workplace nursery facilities are exempt from tax, NIC and reporting requirements. If these criteria are not met, then a taxable benefit may arise. The requirements for the exemption are found at ITEPA 2003, s 318 and relate to:

  1. the child

  2. the premises on which care is provided and the registration requirements

  3. the person or persons who make the premises available

  4. the extent to which the care is available to the employer’s employees

The child must either be:

  1. a child or stepchild of the employee, maintained at the employee’s expense

  2. living with the employee

  3. under the parental responsibility of the employee (ie have the same legal rights or responsibilities as a parent would have)

Specifically, ITEPA 2003, s 318B states that the exemption applies to provision for children up to 1 September following their 15th birthday or 1 September following their 16th birthday if they are disabled.

The premises on which the care takes place must not be used as a private dwelling and must meet the childcare registration requirements in the relevant country (England, Scotland, Wales and Northern Ireland).

The premises must be made available

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