EIM21905 - Benefits: exemption for workplace nurseries: overview of the rules to 5 April 2005

Section 318 ITEPA 2003

Purpose of the legislation

For tax years up to and including 2004/05, the purpose of the legislation is that the exemption should only apply when:

• the narrow conditions for exemption set out below are met, and
• the charge to tax would otherwise be under Section 203 ITEPA 2003.

For tax years up to and including 2004/05, the exemption does not apply to:

• childcare paid for out of the employee’s earnings (Section 62 ITEPA 2003), or where any money paid out by the employer in respect of the childcare represents an application of the employee’s earnings
• childcare provided by means of non-cash vouchers or credit tokens (However, see EIM16050 onwards for guidance on childcare vouchers).

The limited exemption for workplace nurseries (see EIM21900) applies when childcare for eligible children is provided by an employer:

• on the employer’s premises (see EIM21915) or
• in circumstances where the employer is responsible, in whole or in part, for the management and financing of the arrangements under which the childcare is provided (see EIM21920).

See EIM21910for the meaning of childcare and EIM21940 for the conditions relating to the child.

Remember that before 6 April 2005 the exemption does not apply at all if the care is taxable as earnings within Section 62 ITEPA 2003, for example because the childcare has been paid for out of the employee’s earnings or the childcare represents an application of the employee’s earnings.