NIM02440 - Class1: overview of childcare non-cash vouchers: exemptions

Regulation 25 and paragraphs 7 and 7A of Part 5 of schedule 3 Social Security (Contributions) Regulations 2001

The Social Security (Contributions)(Amendment No 4) Regulations 2011 (SI 2011 no 1000)

Social Security (Contributions) (Amendment) Regulations 2018 (SI 2018 No. 120)

From 6 April 1999

A non-cash voucher provided for the costs of childcare is disregarded so long as:

  • the child is under age 16
  • the employee has parental responsibility for the child

From 6 April 2005

A non-cash “qualifying” childcare voucher provided for the cost of childcare is disregarded to the sum of £50 as well as the administration cost of the voucher as long as the following conditions are met:

  1. the voucher is provided to enable an employee to obtain care for a child
  2. the voucher can only be used to obtain qualifying child care
  3. the vouchers are provided under a scheme open to the employer’s employees generally or generally at a location

This condition is intended to encourage employers to provide childcare for all employees. If the scheme is only available to a particular group of employees - for instance, directors or senior managers - the condition will not be met.

The crucial point here is that the scheme must be open to all. But, if an employee chooses not to take part in the scheme it will not mean that the condition is not satisfied.

For the meaning of “care”, “child”, “parental responsibility” and “qualifying childcare” for the purposes of conditions A and B, see NIM02449.

From 6 April 2006, the amount that could be disregarded rose to £55 a week as well as the administration cost of the voucher.

From 6 April 2011

Changes were made to the conditions for providing vouchers to employees for childcare. For those new to a childcare voucher scheme, from that date the amount that is disregarded for NICs purposes is £55 a week for ordinary rate taxpayers, £28 for higher rate taxpayers and £22 (increased to £25 from 6 April 2013) for additional rate taxpayers, as well as the administration cost of the voucher. A further condition was added to the 3 above to administer this change:

  1. it is the responsibility of the employer to determine the tax liability of the employee before awarding vouchers so that they know how much can be correctly disregarded

From 4 October 2018

Changes were made to paragraphs 7 and 7A of Part 5 of schedule 3 to the Social Security (Contributions) Regulations 2001 so that vouchers are disregarded only when provided to an “eligible employee”. Condition C above was also altered in a corresponding manner so that the vouchers need only be provided in a scheme open to the employer’s “eligible employees” generally or generally at a particular location, as opposed to all of the employer’s employees generally or generally at a particular location. See NIM02454 for the definition of “eligible” employee.