SE21972 - Benefits: exemption for workplace nurseries: commercially marketed nursery schemes: dealing with approaches from employers

Employers and employees are free to enter into whatever contractual arrangements they choose. But you cannot comment on the tax consequences of the proposed arrangements (and in particular the effectiveness of the salary sacrifice) until they have been put into effect. This is not an area where the Revenue operates any kind of 'clearance' procedure, nor do we give 'pre transaction rulings'. See also SE21960.

However if the childcare arrangements are as described in SE21970 you can tell the employer that if the salary sacrifice is effective the Revenue’s view is that the childcare benefit provided for employees under the scheme does not qualify for exemption under Section 155A ICTA 1988. The employer should therefore make a return of the benefit on forms P11D at the end of the year.

[Note that, while childcare benefits are chargeable to tax (except where Section 155A applies) they are not subject to the extended Class 1A NIC charge which applies to most other taxable benefits from 6 April 2000. The Class 1A exclusion applies to all childcare benefits, not just those that are exempt from tax.]

For guidance on dealing with disputes if the employer or employee will not accept the Revenue view, see SE21973.