A Gogeta guide

Workplace nursery partnerships: what the rules actually require

A practical compliance and due-diligence guide for employers, HR and reward teams.

Published and last reviewed: September 2026. Based on legislation and HMRC guidance current at the date of review.

Workplace nursery partnerships are one of the most valuable benefits an employer can offer working parents. The rules behind them aren't complicated, but they are specific — and workplace nursery partnerships either meet them or they don't.

This guide sets out what the law requires, what the conditions mean in practice, how to assess whether a provider's scheme measures up, and how Gogeta approaches the same requirements.

Key takeaways

The exemption comes from section 318 of ITEPA 2003. It lets an employer offer tax-free childcare by partnering with an existing nursery, rather than building one on site.
It applies only when the partnership conditions are met, including the requirement for employers to be partly responsible for financing the care and partly responsible for managing it.
On financing, HMRC looks for a real and substantial commitment to funding the nursery and sharing in its risks — more than paying fixed fees for places.
On managing, HMRC looks for genuine influence over how the care is provided — more than occasional advice or a seat on a committee with no real brief.
The cost to the employer depends on the structure. In some models the employer's National Insurance saving can offset its contribution to the nursery, but that depends on the amounts involved and the employer's circumstances.
Everything turns on whether the conditions are met in substance, not just on paper. That's the question to bring to any provider.

What is a workplace nursery partnership?

Short answer: it's a way for an employer to offer staff tax-free childcare by partnering with a nursery that already exists, instead of opening one at the workplace.

Here's how it works. An employee pays their nursery fees through salary sacrifice — out of gross pay, before tax and National Insurance. Because the workplace nursery exemption applies, those fees are free of tax and NIC. For a lot of parents that's a saving of up to 40% on the cost of childcare.

Why does the exemption exist?

Short answer: the exemption sits in section 318 of the Income Tax (Earnings and Pensions) Act 2003 and the government introduced it in 1990 to get employers investing in childcare and help more parents back into work.

It's the same lever behind Cycle to Work, the electric-vehicle scheme and salary-sacrifice pensions. In each case, a tax exemption nudges people towards something the government wants more of — greener commuting, more saving, or in this case, affordable childcare and higher workforce participation.

What the legislation requires

Section 318 sets the conditions for the exemption. For an employer partnering to provide a nursery rather than running one alone, the key condition is that the employer is wholly or partly responsible for financing and managing the provision of the care.

Those are the two conditions a partnership stands or falls on. Alongside them sit some more mechanical requirements:

The child. The care must be for a child the employee is responsible for — their own child or stepchild, or a child who lives with them and for whom they have parental responsibility.
The provision. The childcare must be registered or approved (for example, Ofsted-registered in England), and provided somewhere that isn't a private home.
Availability. The benefit must be made available across the workforce on a consistent basis, not offered to a hand-picked few.

The exact wording matters, so confirm the specifics with your own adviser rather than taking any provider's summary — including this one — as the final word.

What the financing and managing conditions involve

The legislation says “financing and managing”. Published guidance on the partnership conditions goes further about what each one actually asks for — and this is the part worth understanding, because it's where a weak scheme comes apart.

Financing

The financing test asks for a real and substantial commitment to funding and taking financial responsibility for a nursery partner. What counts is a genuine financial stake — for example, agreeing to meet a proportion of the nursery's overall costs, or a longer-term commitment to its financial viability.

Managing

Managing doesn't mean the day-to-day running of the nursery — not staffing, ratios or curriculum. But it's also more than being kept informed. Occasional advice, the odd update call, or a seat on a committee with no real brief won't meet the test. What's required is close, genuine involvement in how the care is provided.

An employer can appoint someone — such as an employee who is a parent — to carry out this role on its behalf. But that person has to be genuinely empowered to act, and has to actually do so, with their involvement recorded.

How to assess a provider

Because the exemption depends on these conditions being met in substance, a provider's structure is really what you're assessing. Four questions get to the heart of it — ask them of any provider, including us:

What does the employer's financial contribution to the nursery actually consist of?
What does the employer's management involvement look like in practice?
Can you see the management records?
What tax advice has the provider taken on the model, and can your own adviser review it?

For the fuller version — everything a well-structured arrangement should be able to evidence, laid out so you can work through it in a provider conversation or procurement review — use our diligence checklist for HR and reward teams.

How Gogeta approaches these requirements

Gogeta's partnerships are built around a genuine employer financial responsibility to the partner nursery, and a defined management role carried out by a parent acting as the employer's representative, with decisions recorded so the involvement can be evidenced.

What sets the model apart is the work behind it. Gogeta's financing and management protocols were designed with independent specialist tax advice, and have been reviewed by advisers acting for clients across a range of sectors. If you're taking advice on this, we're glad to share our full technical pack for your adviser to review.

Frequently asked questions

Does the nursery have to be at my workplace?

No. The exemption covers nurseries on an employer's premises, but it also allows an off-site partnership, as long as the partnership conditions — including financing and managing the provision — are met. That makes the benefit workable for remote and multi-site teams. Being off-site isn't the deciding factor; meeting the conditions is.

Is there a cap on how much an employee can save?

No. Unlike the older childcare voucher scheme, the workplace nursery exemption isn't capped. It's available to higher earners and covers the full nursery cost put through salary sacrifice. Savings depend on the fees and the parent's tax rate, but many parents save up to 40%.

Does “managing” mean I have to help run the nursery?

No. You're not responsible for staffing, ratios or day-to-day operations. What's needed is genuine influence over how the care is provided — regular, real and recorded. It's a governance role, not an operational one.

Can we partner with a nursery a parent already uses?

Usually, yes. A good provider will either already have that nursery registered or be able to bring it on board, so parents don't have to move their child to take up the benefit.

Sources and further reading

Primary source: Section 318, Income Tax (Earnings and Pensions) Act 2003

Further reading:

This guide is general information, not tax or legal advice. The workplace nursery exemption depends on the specific facts of each arrangement. For a view on your own arrangements, take professional advice before offering the benefit.