The Finance Act 2018 introduced an incentive for employers to provide childcare services and fitness centre facilities to employees.
The incentive allows employers to claim accelerated capital allowances for capital expenditure incurred on the provision of childcare services or fitness centre facilities for their employees. Capital allowances are deductions that are allowed from an individual/employer’s taxable income for capital expenditure incurred for the purpose of a trade. This change relates to qualifying capital expenditure incurred after 1 January 2019.
Construction of Childcare and Fitness Centre Facilities:
Capital allowances in the form of industrial buildings annual allowances (IBAA’s) can be claimed on qualifying expenditure on a qualifying premises.
A qualifying premises is a building/structure used for the provision of childcare services or fitness centre facilities exclusively for employees of a business, and not the general public. If the employer is a company, the facilities can also be made available to the employees of a connected company and the relief can still be claimed. Relevant requirements of the Childcare Act 1991 Regulations must be met in the case of childcare facilities.
Qualifying expenditure is expenditure on the construction or refurbishment of a qualifying premises.
IBAA’s are generally given over a 25 year period at a rate of 4% of the expenditure incurred. In the case of a qualifying premises, the rate is accelerated and can be claimed at a rate of 15% over 6 years and 10% in year 7.
Childcare and Fitness Centre Equipment:
Wear and tear allowances are generally given over an eight-year period (12.5% rate) for machinery/ plant used in connection with the trade. However where childcare and fitness centre equipment is provided for use by employees, this rate is accelerated to 100%. This means that 100% of the capital expenditure incurred can be claimed in full for the first year in which the equipment is used.
How to Claim the Relief?
This relief can be claimed by the employer on their Form 11 or Form CT1, depending on the return that the employer regularly submits. It can be claimed in the chargeable period in which the conditions are met.
If you require any assistance with this, please contact our Tax Team.