Section 318A | Childcare: limited exemption for other care ^F1

(1)If conditions A to D are met in relation to the provision for an eligible employee of care for a child—^F1F2F3F4F5

(a)no liability to income tax arises by virtue of section 62 (general definition of earnings), and^F1F4

(b)liability to income tax by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) arises only in respect of so much of the amount treated as earnings in respect of the benefit by virtue of section 203(1) or 203A(1) (as the case may be) as exceeds the exempt amount.^F1F4F6

For the meaning of “eligible employee”, see section 318AZA, and for the meaning of “care” and “child”, see section 318B.

(2)If those conditions are met only as respects part of the provision, subsection (1) applies in respect of that part.^F1

(3)Condition A is that the child—^F1

(a)is a child or stepchild of the employee and is maintained (wholly or partly) at the employee’s expense, or^F1

(b)is resident with the employee and is a person in respect of whom the employee has parental responsibility.^F1

For the meaning of “parental responsibility”, see section 318B.

(4)Condition B is that the care is qualifying child care.For the meaning of “qualifying child care”, see section 318C.^F1

(5)Condition C is that the care is provided under a scheme that is open—^F1

(a)to the employer’s eligible employees generally, or^F1F7

(b)generally to those at a particular location.^F1

(5A)Where the scheme under which the care is provided involves—^F1F8

(a)relevant salary sacrifice arrangements, or^F1F8

(b)relevant flexible remuneration arrangements,^F1F8

Condition C is not prevented from being met by reason only that the scheme is not open to relevant low-paid employees.

(5B)In subsection (5A)—^F1F8

“relevant salary sacrifice arrangements” means arrangements (whenever made) under which the employees for whom the care is provided give up the right to receive an amount of general earnings or specific employment income in return for the provision of the care;

“relevant flexible remuneration arrangements” means arrangements (whenever made) under which the employees for whom the care is provided agree with the employer that they are to be provided with the care rather than receive some other description of employment income;

“relevant low-paid employees” means any of the employer's employees who are remunerated by the employer at a rate such that, if the relevant salary sacrifice arrangements or relevant flexible remuneration arrangements applied to them, the rate at which they would then be so remunerated would be likely to be lower than the national minimum wage.

(5C)Condition D is that the employer has, at the required time, made an estimate of the employee's relevant earnings amount for the tax year in respect of which the care is provided (see section 318AA).^F1F9

(6)For the purposes of this section the “exempt amount”, in any tax year, is the appropriate amount for each qualifying week in that year.^F1F10

(6A)In subsection (6) “the appropriate amount”, in the case of an employee, means—^F1F11

(a)if the relevant earnings amount in the case of the employee for the tax year, as estimated in accordance with subsection (5C), exceeds the higher rate limit for the tax year, £25 ,^F1F11F12

(b)if the relevant earnings amount in the case of the employee for the tax year, as so estimated, exceeds the basic rate limit for the tax year but does not exceed the higher rate limit for the tax year, £28, and^F1F11

(c)otherwise, £55.^F1F11

(7)A “qualifying week” means a tax week in which care is provided for a child in circumstances in which conditions A to C are met.A “tax week” means one of the successive periods in a tax year beginning with the first day of that year and every seventh day after that (so that the last day of a tax year or, in the case of a tax year ending in a leap year, the last two days is treated as a separate week).^F1

(8)An employee is only entitled to one exempt amount even if care is provided for more than one child.But it does not matter that another person may also be entitled to an exempt amount in respect of the same child.^F1

(9)An employee is not entitled to an exempt amount under this section and under section 270A (limited exemption for childcare vouchers) in respect of the same tax week.^F1