Tax Exemption for the Provision of Childcare and Childcare Vouchers - Adjustments to the definition of "qualifying childcare"

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The Income Tax (Earnings and Pensions) Act 2003 provides limited tax exemptions for the provision by employers of childcare and childcare vouchers. If the conditions for the exemption are met, a tax liability only arises to the extent that the value of the provision exceeds £55 per week.

One of the conditions for the limited exemption is that the type of childcare provided by the employer, or by means of childcare vouchers, is "qualifying childcare". There are different definitions of "qualifying childcare" depending on whether it is provided in England, Wales, Scotland or Northern Ireland.

Changes are being made by the Income Tax (Qualifying Child Care) Regulations 2007 to the definitions from 6 April 2007 to reflect the provisions of

• the Tax Credits (Approval of Child Care Providers) (Wales) Scheme 2007 which came into force on 1 February 2007
  
  
• the Childcare (Voluntary Registration) Regulations 2007 which comes into force on 1 April 2007
  
  
• the Tax Credits Act 2002 which has a less restrictive definition of qualifying out of school hours.

The definition of "qualifying childcare" is therefore broadened to include care provided under the Welsh Childcare scheme and care provided by a childcare provided under the Childcare (Voluntary Registration) Regulations.

The existing definition of "qualifying childcare" includes care provided for a child out of school hours by a school on school premises or by a local authority. It is limited, however, to children who are at least 8 years old in England and Wales, and to children who are at least 12 years old in Northern Ireland. These age restrictions are removed by the new Regulations so that, from 6 April 2007, the childcare provided by employers or that can be obtained by means of childcare vouchers can include out of school hours care irrespective of the child's age.

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Further information:
Income Tax (Qualifying Child Care) Regulations 2007
Explanatory Memorandum to the Income Tax (Qualifying Child Care) Regulations 2007