The alliance said it has received confirmation from the Information Commissioner's Office (ICO), the body responsible for enforcing the new General Data Protection Regulations (GDPR) set to be introduced in May this year, that it will regard anyone either actively using or storing electronic data as a "data processor" under the new laws.
This means that childcare providers will be subject to ICO's annual registration fee - which starts at £40, but can be as much as £500 - for as long as they hold information.
Most insurance companies recommend that childcare providers store some data - such as accident logs and safeguarding notes - until the child is 21 years. The alliance said that this means early years providers storing data electronically may have to continue to pay an annual ICO registration fee even after they have left the profession or retired.
The ICO has confirmed that providers with securely stored, paper-based records, that are not intended to be uploaded to a computer, will not be subject to registration fees.
Melanie Pilcher, the Pre-school Learning Alliance's quality and standards manager, said smaller providers have been seeking clarity on this issue for months.
"There's no doubt that the most secure and efficient way for providers to store data is electronically and so it's disappointing that the ICO cannot ensure the GDPR makes a provision for that," she said.
"The ICO's compromise - to ensure that records are paper-based, securely-stored and not uploaded to a computer - may mean providers don't have to pay a registration fee but could leave some storing reams upon reams of paper."
Pre-school Learning Alliance member Sarah Neville of Knutsford Childminding, said: "ICO tell us that if we retain information digitally we will have to continue paying them an annual fee until the youngest recorded child is 21 years and three months old (the retention period for certain information required by the Limitation Act 1980), by which time it is unlikely the digital media will still be accessible - and, as pointed out by many providers, they will have been retired for several years.
"However, if we retain information in paper format, we can stop paying when we retire or leave the profession. Good news? Certainly for those providers who have unlimited printer ink, don't use digital systems and are happy to keep storage boxes full of paperwork in cupboards or lofts for years to come.
"However, please spare a thought for those providers who are using online systems, believing themselves to be ‘paperless' and ‘eco-friendly' and who will now be forced to spend hours printing - or, of course, continue paying ICO in perpetuity."