Part 4

Employment income: exemptions
Chapter 6

Exemptions: non-cash vouchers and credit-tokens

Exemptions for particular non-cash vouchers and credit-tokens

Limited exemption for qualifying childcare vouchers
270A
1
If qualifying childcare vouchers are provided for an
eligible
employee—
a
no liability to income tax arises by virtue of section 62 (general definition of earnings), and
b
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.
For the meaning of “eligible employee”, see section 270AA.
2
A “
qualifying childcare voucher
” means a non-cash voucher in relation to which Conditions A to
D
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
eligible
employees generally, or
b
generally to those at a particular location.
5A
Where the scheme under which the vouchers are provided involves—
a
relevant salary sacrifice arrangements, or
b
relevant flexible remuneration arrangements,
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)—
- “
relevant salary sacrifice arrangements
” means arrangements (whenever made) under which the employees for whom the vouchers are provided give up the right to receive an amount of general earnings or specific employment income in return for the provision of the vouchers;
- “
relevant flexible remuneration arrangements
” means arrangements (whenever made) under which the employees for whom the vouchers are provided agree with the employer that they are to be provided with the vouchers 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 voucher is provided (see section 270B).
6
For the purposes of this section the “exempt amount”, in any tax year, is
the sum of—
a
the appropriate amount
for each qualifying week in that year, and
b
the voucher administration costs for that year.
6ZA
In subsection (6)(a) “the appropriate amount”, in the case of an employee, means—
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
,
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
c
otherwise, £55.
6A
The “
voucher administration costs
” for any tax year in respect of which qualifying childcare vouchers are provided for an employee means the difference between the cost of provision of the vouchers and their face value.
The face value of a voucher is the amount stated on or recorded in the voucher as the value of the provision of care for a child that may be obtained by using it.
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).
10A
In this section “
cost of provision
”, in relation to a childcare voucher, has the meaning given in section 87(3) and (3A).
11
The powers conferred by section 318D (childcare: power to vary
amounts
and qualifying conditions) are exercisable—
a
in relation to the
amounts
specified in subsection
(6ZA) above
as in relation to the
amounts
specified in section
318A(6A)
, 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.
Words in s. 270A(1) substituted (with effect in accordance with s. 16(7) of the amending Act) by Finance Act 2005 (c. 7), s. 16(4)
Word in s. 270A(11) substituted (with effect in accordance with Sch. 8 paras. 7-10 of the amending Act) by Finance Act 2011 (c. 11), Sch. 8 para. 2(6)(c)
S. 270A(10A) inserted (with effect in accordance with s. 15(5) of the amending Act) by Finance Act 2005 (c. 7), s. 15(4)
S. 270A(6ZA) inserted (with effect in accordance with Sch. 8 paras. 7-10 of the amending Act) by Finance Act 2011 (c. 11), Sch. 8 para. 2(5)
Words in s. 270A(1) inserted (21.4.2017) by Childcare Payments Act 2014 (c. 28), ss. 63(2)(b), 75(2); S.I. 2017/578, reg. 3(f) (with reg. 8)
Word in s. 270A(1) inserted (21.4.2017) by Childcare Payments Act 2014 (c. 28), ss. 63(2)(a), 75(2); S.I. 2017/578, reg. 3(f) (with reg. 8)
Words in s. 270A(6)(a) substituted (with effect in accordance with Sch. 8 paras. 7-10 of the amending Act) by Finance Act 2011 (c. 11), Sch. 8 para. 2(4)
Words in s. 270A(6) substituted (with effect in accordance with s. 15(5) of the amending Act) by Finance Act 2005 (c. 7), s. 15(2)
Word in s. 270A(2) substituted (with effect in accordance with Sch. 8 paras. 7-10 of the amending Act) by Finance Act 2011 (c. 11), Sch. 8 para. 2(2)
S. 270A inserted (with effect in accordance with s. 78(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 13 para. 3
S. 270A(5A)(5B) inserted (with effect in accordance with s. 36(3) of the amending Act) by Finance Act 2011 (c. 11), s. 36(1)
Word in s. 270A(5)(a) inserted (21.4.2017) by Childcare Payments Act 2014 (c. 28), ss. 63(3), 75(2); S.I. 2017/578, reg. 3(f) (with reg. 8)
Words in s. 270A(11) substituted (with effect in accordance with Sch. 8 paras. 7-10 of the amending Act) by Finance Act 2011 (c. 11), Sch. 8 para. 2(6)(b)
Word in s. 270A(6ZA)(a) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Income Tax (Exempt Amount for Childcare Vouchers and for Employer Contracted Childcare) Order 2013 (S.I. 2013/513), arts. 1(2), 2(2)
S. 270A(5C) inserted (with effect in accordance with Sch. 8 paras. 7-10 of the amending Act) by Finance Act 2011 (c. 11), Sch. 8 para. 2(3)
Word in s. 270A(11) substituted (with effect in accordance with Sch. 8 paras. 7-10 of the amending Act) by Finance Act 2011 (c. 11), Sch. 8 para. 2(6)(a)
S. 270A(6A) inserted (with effect in accordance with s. 15(5) of the amending Act) by Finance Act 2005 (c. 7), s. 15(3)
Pt. 4 modified (10.6.2021) by Finance Act 2021 (c. 26), s. 26(3)