Revenue Tax Briefing Issue 37, October 1999
The 1999 Finance Act introduced two provisions relating to childcare:
In general, Section 34 Finance Act 1999 allows that certain free or subsidised childcare facilities provided by employers for the benefit of their employees will not be subject to tax under the benefit-in-kind rules. The exemption does not apply if the employer simply pays or subsidises the cost to an employee of an independent crèche or nursery.
The legislation provides that an employee will not be charged income tax on a benefit- in-kind arising in respect of any expense incurred by an employer in or in connection with the provision of a childcare service in qualifying premises for a child of a director or employee.
Childcare service means any form of childminding service or supervised activity to care for children, whether or not provided on a regular basis.
Qualifying premises means premises which:
and in respect of which it can be shown that the requirements of Article 9, 10 or 11, as appropriate, of the Child Care (Pre-School Services) Regulations 1996 (S.I. No. 398 of 1996), have been complied with.
The requirements of the Articles referred to relate to giving notice to a relevant Health Board by a person carrying on or proposing to carry on a pre-school service or notification of a change in the circumstances of such a service and the payment of the required fee.
The definition of qualifying premises is specific in that the premises are provided solely by the employer.
The premises may be provided by the employer in partnership with others. However the employer must also be wholly or partly responsible for financing and managing the provision of the service.
The premises may be provided by someone else but as outlined in the definition above the employer must also be wholly or partly responsible for financing and managing the provision of the service.
The reference in the legislation to the employer being wholly or partly responsible for financing and managing the provision of the childcare service is to ensure that an employer’s role in providing the service is continually significant and not simply token involvement without responsibility and control over the service.
Financing the provision of the service does not mean simply paying for places in a crèche or nursery run by someone else. There must be a commitment on the employer’s part to fund the facility or provide it with capital. Some examples would be funding the construction or refurbishment of the premises and equipment, staff salaries etc. There would generally be a correlation between such costs borne by an employer and the number of places provided for the employees of that employer.
Managing the provision of the service means much more than giving advice or being consulted from time to time. It does not necessarily mean day to day management or direct responsibility for caring for the children. It would be expected that the employer would have a say in the overall policy of the facility, appointing and monitoring the performance of personnel engaged to look after the children, involvement in the allocation of spaces and financial control and management. The employer’s participation could be through a committee, partnership or special company set up for the purpose.