Fostering Services

Foster Carers are in a unique position. The caring for children in a family unit by foster carers is treated as a business by H M Revenue & Customs.

• You are treated as a self employed person.
• You may be responsible for the preparation of annual accounts and a self-assessment tax return, which has to be submitted to H M Revenue & Customs.
• You may be liable to pay Income Tax and National Insurance.

Where there is a payment from either a local authority or a fostering agency, then a Foster Care exemption may be available (this does not apply to private fostering arrangements).

The Foster Care Scheme works in two ways and the way, which will be relevant to you, will largely depend upon the level of your ‘ total receipts ‘ from Foster Care.

‘Total’ receipts are all of the payments you receive from the local authority or independent fostering provider and include fees, salaries, reward payments, holiday and clothing allowances etc.

Against these receipts, it is possible to claim set allowances (in tax jargon called ‘ qualifying amount ‘ ) which consist of a fixed amount of £10,000 per annum per household and an amount for each foster child of £200 per week for a child below the age of 11 or £250 per week for a child aged 11 or over.

The First Way

If your total receipts are less than the set allowances, then for taxation purposes you are treated as having no profit or loss from foster care for that particular tax year.

As part of our service to carers, we can carry out an annual financial health check to review your individual situation.

The Second Way

If your total receipts are more than the set allowances, then you have a choice of two methods of calculating your profit for tax purposes:-

• Simplified method

In this case, your actual expenses are ignored and you will pay tax on the difference between your total receipts and the set allowances.

• Profit Method

This is generally the less usual method and calculates your tax on the difference between your total receipts and your actual expenses.

It cannot be over emphasised that it is not possible to claim set allowances and expenses – it is one or the other.

The experience we have at Williams Giles enables us to advise you on the best approach in your particular situation.

Obviously, it is a family ‘job’ to look after the children placed in your care. Depending on your individual circumstances, you may wish to have one person regarded as the carer for tax purposes. Alternatively, you may wish to treat it as a partnership between the two partners, especially where there is no other income coming into the house and you are caring for three children. Each household’s situation is different and therefore you may feel it is advisable to seek advice from an accountant before you go too far down the line.

About Us

We have built up considerable experience in dealing with Agencies, Local Authorities and Foster Carers and are therefore fully aware of the unique tax treatment that is available to foster carers.

We were also involved in the national working party co-ordinated by the Department of Health looking at costs of caring for children to provide a general agreed figure for the costs of cared for children.

What we would do for you

We provide all new foster carers with our ‘Foster Carer Pack’ incorporating all the necessary forms and information you will need for tax, national insurance and accounts purposes.

We will :

• Initially register you with the Inland Revenue Tax and NI Contributions Agency.
• Discuss your household circumstances and advise you of the best treatment of your income for tax purposes.
• Assist in the preparation of your annual tax return and prepare your fostering income statements.
• Endeavour to give you an indication of your potential tax and NI liability based on your individual circumstances.
• Check your tax assessments and advise you when your tax liability is payable.
• Answer any queries that may arise.

Fees

You will find that because of their wealth of experience, our partners and staff can provide a complete and helpful service at a very reasonable price.

Following our aim of providing a value for money service, we can, in the majority of cases operate on a fixed fee basis so you will know in advance how much you will have to pay for our work.

These fixed fees can include:-

1. Financial health check to review necessity of completing a tax return etc.
2. Initial registration with all of the necessary authorities.
3. Foster Income Statement and Tax Return.
4. Partnership tax returns where necessary.
5. Advising on tax credits.
6. Pension Forecasts.

Our charges for enhanced care cases will normally be based on how much time we have to spend looking after your accounts and tax matters.

Need More information?

For more information on the services we provide to foster carers and fostering agencies, please click here.