My client runs a childcare centre.  During term-time it is largely pre-school children with some pre- and post-school care for primary school children.  During the school holidays she caters for all children up to the age of 12. She offers a wide range of creative, quiet and physical activities to cater for different children’s preferences, and these activities are generally led by students in the main holidays, or by the nursery staff for the rest of the time.

She is OFSTED regulated – does this mean it is exempt as education? 


In order to be exempt as education under VATA 1994, Schedule 9, Group 6, your client would need to be an eligible body; in other words (for this age group) a school as defined under the Education Acts.

Non-residential childcare falls under Group 7 which exempts Health and Welfare.  Item 9 exempts the supply by a state regulated private welfare institution of welfare services directly connected with the care or protection of children and young persons.

Where the body is required to be Ofsted regulated because it provides paid-for care to children under the age of 8 it will be a state regulated body.  In addition to exempting care for the under-8s, it can also choose to exempt an equivalent range of care to older children.  The conditions for this exemption are set out in VAT notice 701/2 para 2.2.2, and they are that the body:

  •  provides care on a commercial basis to children who are younger than 8 years old, as well as to older children;
  • operates identical hours of opening for all age groups, and
  • provides activities for children over 8 years old that are comparable with those provided for younger children.

Holiday clubs and after-school clubs can be problematic, particularly those which have a specific focus on a narrow range of activities rather than a wide range aimed at accommodating all children.  However, HMRC have in the past challenged even those offering a wide range, simply because in marketing material the body emphasised the range of activities offered. This problem has now been clarified to a large extent by the tribunal decision in RSR Sports limited. An HMRC brief was published following the decision which sets out the key features they would expect to find to support that the supply is one of childcare rather than the activities.

These are that:

  • The members of staff were merely supervising activities;
  • They did not hold coaching or teaching qualifications;
  • There was no external standard to which the services were being provided, and
  • The activities were merely an adjunct to the essential service which was childcare.

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