Childcare Sector
In calculating any taxable profits, HMRC 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 PACEY provides an acceptable way of recording income and outgoings. Receipts are not required for items costing less than £10. Receipts are required if a number of smaller items are purchased at one time and the total cost is £10 or more.
Household expenditure
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, Council Tax and Rent |
| 10 | 8% | 2% |
| 15 | 12% | 4% |
| 20 | 17% | 5% |
| 25 | 21% | 6% |
| 30 | 25% | 7% |
| 35 | 29% | 9% |
| 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 are not required.
Car expenses
Where appropriate, childminders can use the simplified expenses mileage rates. However, if the childminder wishes, the actual cost of car expenses for childminding purposes can be claimed instead.
Other costs
Also allowable – the cost of toys, outings, books, safety equipment, stationery, travel fares, membership fees or subscriptions to your childminding organisation, public liability insurance premiums and the actual cost of telephone use for childminding purposes.
Grants
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
TV set and licence
You can only claim expenses for the cost of a television licence and capital allowances on a television set used wholly and exclusively for childminding.
You must be able to show that the set is used ONLY for the minded children.
HMRC refer to expenses that are only used by the business as ‘wholly and exclusively used in the performance of the business’. You may see this in official documents. It means they must have been bought and intended to be used for use in the business.
Telephone
When you use a phone (landline or mobile) for business you can claim a proportion of the line rental, plus the cost of the business calls you make. This will all reduce your tax bill. You need to work out what proportion of calls are for business. An itemized bill can help you do this.
So what about ‘pay as you go’? We realise that you don’t get an itemised billing so you need to make a reasonable estimate as to the business use of that mobile phone. You might base this on the number and length of the calls. Whatever that amount of use is must be applied to both the original cost of purchasing the phone and the ‘top-up’ vouchers.
For example, if a childminder decides they use their mobile ‘pay as you go’ phone 50% for business and 50% private use, they could claim:
Initial cost of phone £50
Business use 50%
Claim 50% of £50 = £25
Top-up vouchers purchased during the year £200
Claim 50% of £200 = £100
Total expense to be claimed – phone £25 + top-up vouchers £100 = £125
Some childminders are on call 24/7 and have a separate mobile. The full costs would then be allowable.
Broadband
The cost of an internet connection such as broadband is allowable if it is used for the childminding business. Remember if the family also use internet, only the business percentage is allowable.