Childminders work in their own homes and are paid by parents for
looking after their children, often while the parents are at work.
Profits from childminding are usually assessable under Case I of
Schedule D, although some occasional childminders may be assessable
under Case VI.
Many childminders are members of the National Childminding Association (NCMA). The NCMA has produced a Members Handbook and this contains guidance on paying tax and National Insurance. The handbook describes the expenses that Inspectors will allow as deductions from childminding income and it is based on an agreement between the Inland Revenue and the NCMA.
Childminders, whether members of the NCMA or not, may calculate their expenses using the NCMA/Inland Revenue agreement. Their statutory rights are not affected by the agreement. Childminders may calculate their profits on the normal basis if they wish to do so.
The NCMA has been told that in calculating any taxable profits, Inspectors will allow as deductions from childminding income expenses which are reasonable in amount and which are directly attributable to childminding. The cash book and attendance register produced by the Association provides an acceptable way of recording income and outgoings. Receipts for items of expenditure will not be required for items costing less than £10.
The agreement is based on the hours that childminders work and not on the number of children they care for. A childminder looking after a child on a full time basis for 40 or more hours each week is entitled to claim the full time proportion of expenses.
How this works is illustrated in the following table:
|Hours worked||% of Heating and lighting costs||% of Water rates and Council tax Rent|
|40 (full time)||33%||10%|
The full time figures shown in the table should be scaled down
from depending on hours worked.
Wear and tear of household furnishings
A deduction of 10% of total childminding income may be made to cover the wear and tear of furniture and household items. This is intended to include household items which are not used wholly and exclusively in childminding. A childminder claiming this deduction may not however claim relief for the cost of replacing such household items. Reasonable costs of cleaning household items where the need for cleaning is as a result of childminding activities may be allowed as a separate item.
The agreement also covers the following expenditure:
Food and drink
Reasonable estimates for the costs of food and drink provided for the children being cared for are acceptable and receipts will not be required.
Where appropriate childminders can use the authorised mileage rates within the Fixed Profit Car Scheme (see BIM47701) as a basis for their claims. However if the childminder wishes the actual cost of car expenses for childminding purposes can be claimed instead.
Also allowable - the cost of toys, outings, books, safety equipment, stationary, travel fares, the NCMA subscription, public liability insurance premiums and the actual cost of telephone use for childminding purposes.
Grants received by childminders to help them to start up their businesses or to meet capital or running costs should be dealt with following normal principles see BIM40450+. If a grant is received before the business begins to trade, the grant will not be a trade receipt. A start up grant may reduce the amount of pre-trading expenditure on which relief is available, see BIM46355.