The relaxation of the benefit-in-kind tax arrangements for employer supported childcare has been welcomed by the employers body IBEC as "a move in the right direction". Under Finance Bill 2001 employers will no longer have to be involved in the management of the childcare facilities for their employees to qualify for relief from benefit-in-kind tax for use of the facilities.

The 1999 Finance Act introduced an exemption from benefit-in-kind tax for employees using employer-provided childcare. The move was aimed at increasing the supply of childcare facilities by encouraging employers to provide creches.

But the relief was seen as very restricted in that the employer had to be wholly or partly responsible for both the financing and running of the childcare service. Following representations from employers, the provision is being amended.

Finance Bill 2001 provides that the benefit-in-kind exemption will be allowed where the employer has financed the facility but is not involved in managing it.