Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
I am the opinion that the moneys received from free places schemes forms part of the income of the nursery and is taxable in the usual manner. Various businesses are already complaining that the recent increase in hours for these children is squeezing income from more affluent parents and hence the nursery income.
I am so sorry to have to rain on your wife's parade.
Thanks, ***** ***** to be a gray area as some councils say you don't pay tax on it some say you do. My wife gets £3.00 per hour per child if she pays tax on that it does not leave enough.