The position is that VAT is charged on child care services at the standard rate of 21 per cent. The situation is governed by European VAT law. Under the EU Sixth VAT Directive, education is an exempt service for VAT purposes, but this exemption does not extend to child care services or nurseries. Such facilities are liable for VAT when they are provided in the course or furtherance of business and if their annual turnover exceeds, or is likely to exceed £20,000. However, I should point out that non-profit making child minding services provided by public bodies or recognised charities are exempt from VAT. In addition, creches and playschools which follow a clear educational programme may be exempt if they come within the terms of the exemption for children's education. It is a matter for the Revenue Commissioners to determine whether or not a particular facility follows such a programme.
While the application of EU law in the UK is a matter for the UK authorities, I understand that the UK treatment may be based on their application of the exemption for hospital and medical care. The position in that regard is being checked with the UK authorities.
Finally, as the Deputy is no doubt aware, VAT is a tax on final consumption and, therefore, according to the general rule is paid out of the after tax income of the consumer.
