Childminder’s Tax Relief

Introduction
The Childminders’ tax relief was introduced in the Finance Bill 2006 for the 2006 tax year and all subsequent tax years. The relief is not time limited. Initially the exemption applied if the gross income of the Childminder did not exceed €10,000 in the year but that was increased in the Finance Act 2007 and all subsequent years to €15,000.

Details of scheme
The relief applies only to Childminders who are registered as self-employed. The Childminding services must be provided in the Childminder’s own home.

The Childminder may mind up to 3 children (under 18 years) at any one time, excluding the Childminder’s own children. A Childminder could, conceivably, mind 3 children in the mornings and 3 different children in the afternoon and still qualify.

The gross annual income from Childminding cannot exceed the limit (currently €15,000).If 2 people are minding children in the same premises, the limit is split between them. Each is not entitled to €15,000.

How to claim the Relief
To avail of the relief the Childminder must elect for it. This should be done when submitting a tax return. For self-employed people a tax return must be filed by 31 October in the year after the tax year to which the return relates. So the 2008 tax return must be filed by 31 October 2009, and the Childminder can claim relief on income up to 15,000.

If the Childminder does not elect for the relief then they are fully taxable on the income. However they are allowed deduct a variety of expenses which they may have incurred in earning that income before tax is applied.

A self-employed person completes a Form 11 tax return. The election for the Childminding relief appears at item 163. The gross amount of income is entered into the box. From 2007 onwards this cannot exceed €15,000.

By signing the return the Childminder is confirming that they have notified the relevant person, recognised by the HSE, that they are providing childcare services. It is not necessary to enclose any letter or proof of this with the return to Revenue. It maybe looked for in the event that Revenue carries out an audit so the notification should be kept safe. The Childminder must notify the relevant person and make the election to Revenue each year they are minding children.

PRSI
If income is exempt from tax, it is usually exempt from PRSI also. Income, to which this tax relief applies, however, remains liable for PRSI. Since Childminders are self-employed, there is no employer who can deduct the PRSI, so when a person makes the election for the relief in their tax return, their names will be sent by Revenue to the Department of Social and Family Affairs. That Department will write to the people requesting payment of a flat rate of PRSI for the year, currently €253. It should be noted that if the gross annual income of the person is less than €3,174 then there is no PRSI to pay, so no PRSI contribution is made for that year.

If anyone has any queries on this tax relief I would be happy to be of assistance. My details are:
Vivion O’Brien, Revenue Commissioners, Taxes Policy & Legislation Division, New Stamping Building, Dublin Castle, Dublin 2 Email: vobrien@revenue.ie Phone: 01-6748685