Income Tax (Earnings and Pensions) Act 2003 section 318A

Childcare: limited exemption for other care

Section 318A provides a limited income tax exemption for employer-contracted childcare, where certain conditions are met, up to a weekly exempt amount that varies according to the employee's earnings level.

• Where conditions A to D are satisfied, employer-contracted childcare is exempt from income tax up to a weekly exempt amount of £55, £28 or £25, depending on whether the employee's estimated relevant earnings fall within the basic rate, higher rate or additional rate band respectively.
• The child must be the employee's own child or stepchild (maintained at least partly by the employee), or a child living with the employee for whom they have parental responsibility, and the care must be qualifying child care provided under a scheme open to all eligible employees generally or to all employees at a particular location.
• Salary sacrifice or flexible remuneration arrangements do not disqualify a scheme from meeting the availability condition merely because low-paid employees (whose pay would fall below the national minimum wage after the sacrifice) are excluded from the scheme.
• An employee may only claim one exempt amount per tax week regardless of how many children receive care, and cannot claim both this exemption and the separate childcare voucher exemption under section 270A in the same tax week.