Finance Act 2004

Childcare vouchersU.K.

2(1)Chapter 4 of Part 3 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (taxable benefits: vouchers and credit-tokens) is amended as follows.U.K.

(2)In section 84 (meaning of “non-cash voucher”)—

(a)in subsection (1), after paragraph (a) insert—

“(ab)a childcare voucher,”, and

(b)after subsection (2) insert—

“(2A)In this Chapter “childcare voucher” means a voucher, stamp or similar document or token intended to enable a person to obtain the provision of care for a child (whether or not in exchange for it).”.

(3)In section 87 (benefit of non-cash voucher treated as earnings), after subsection (3) insert—

“(3A)In the case of a childcare voucher, the reference in subsection (3)(b) to the services for which the voucher is capable of being exchanged is to the provision of care for a child which may be obtained by using it.”.

(4)In section 95 (disregard for money, goods or services obtained), after subsection (3) insert—

“(3A)In the case of a childcare voucher, the reference in subsection (2)(a) to the services obtained in exchange for the voucher is to the provision of care for a child obtained by using it.”.

3U.K.In Chapter 6 of Part 4 of the Income Tax (Earnings and Pensions) Act 2003 (exemptions: non-cash vouchers and credit-tokens), after section 270 insert—

“270ALimited exemption for qualifying childcare vouchers

(1)If qualifying childcare vouchers are provided for an employee, liability to income tax by virtue of Chapter 4 of Part 3 (taxable benefits: vouchers and credit tokens) arises only in respect of so much of the cash equivalent of the benefit as exceeds the exempt amount.

(2)A “qualifying childcare voucher” means a non-cash voucher in relation to which Conditions A to C are met.

(3)Condition A is that the voucher is provided to enable an employee to obtain care for a child who—

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

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

(4)Condition B is that the voucher can only be used to obtain qualifying child care.

(5)Condition C is that the vouchers are provided under a scheme that is open—

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

(b)generally to those at a particular location.

(6)For the purposes of this section the “exempt amount”, in any tax year, is £50 for each qualifying week in that year.

(7)A “qualifying week” means a tax week in respect of which a qualifying childcare voucher is received.

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).

(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.

(9)An employee is not entitled to an exempt amount under this section and under section 318A (limited exemption for employer-contracted childcare) in respect of the same tax week.

(10)In this section “care”, “child”, “parental responsibility” and “qualifying child care” have the same meaning as in section 318A (see sections 318B and 318C).

(11)The powers conferred by section 318D (childcare: power to vary exempt amount and qualifying conditions) are exercisable—

(a)in relation to the exempt amount specified in subsection (6) above as in relation to the exempt amount specified in section 318A(6), and

(b)in relation to the qualifying conditions for the exemption conferred by this section as in relation to the qualifying conditions for the exemption conferred by section 318A.”.