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Further changes to the definition of ‘qualifying child care’
Friday, March 18th, 2011
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Sections 270A and 318A of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) provide limited tax exemptions for the provision of childcare vouchers and employer-supported childcare. One of the conditions that must be met in order for these exemptions to apply is that the childcare must be “qualifying child care”. The definitions of “qualifying child care” are complex and are different for each country of the UK. Equivalent definitions are also used to determine entitlement to tax credits.
New regulations, which take effect from 6 April 2011, amend the ITEPA provisions in order to maintain consistency with amendments to the definition of qualifying childcare as set out in the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002. The changes are intended to bring into line the rules allowing foster parents and foster carers to provide qualifying childcare for children aged 15 or 16, other than for those whom they are fostering.
Despite these changes, the definitions of “qualifying child care” are extremely complex and impossible to understand without a comprehensive knowledge of the childcare legislation in each of the four countries of the UK. It is very difficult for employers to check whether the childcare or childcare vouchers they provide meet the definitions. For this reason, it is common for employers to use commercial schemes to provide these benefits, leaving it to the schemes to ensure compliance.
HMRC explains the rules in Employer Helpbook E18 How to help your employees with childcare and in Booklet IR115 Paying for childcare. Telephone numbers are provided to obtain further guidance where needed. It normally takes HMRC several months to update and reissue these booklets.
Further information:
The Income Tax (Qualifying Child Care) Regulations 2011
Explanatory memorandum to the Income Tax (Qualifying Child Care) Regulations 2011
