The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
The provision of childcare by the employer is a popular method of incentivising staff with children as it allows all or part of the childcare costs to be funded by the employer free of income tax and national insurance contributions (NIC).
The interaction between employer-supported childcare and the Government ‘tax-free’ childcare scheme introduced in 2017 is considered at the end of this guidance note.
The provision by the employer of a workplace crèche or nursery for the children of employees and directors is completely exempt from income tax and NIC if:
ITEPA 2003, s 318
The childcare facility does not have to be based at the employers’ premises. It can be in other premises as long as they are not used wholly or mainly as a private residence.
Broadly, the child must be under 16 (17 if the child is disabled), be a child or step-child of the employee / director and the employee / director must have parental responsibility for the child, as defined in ITEPA 2003, s 318B(5).
For more information on the complete exemption and a flowchart to help you decide whether a workplace crèche or nursery qualifies, see Appendix 11 of Booklet 480.
See also the Childcare and workplace nurseries guidance note.
There is a limited exemption of up to £55 a
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