BIM52800 - Care providers: Adult Carers and Adult Placement Schemes: establishing profits for 2002/03 and earlier years

Adult carers can be divided into three main categories:

1) RESPITE CARERS

Many carers look after adults in their own home for only a short period, perhaps to give a close relative or another carer a break. This is sometimes called the Short Break Adult Placement Scheme. Although it is regarded as principally a voluntary service the carers do receive small payments on a daily basis for each guest. Respite carers will usually satisfy the conditions to qualify for relief under the Rent a Room scheme that allows up to £3,250 to be received each year free of tax. The limit applies to the carer's home and is halved to £1,625 if, during the basis period for the year, someone else received income from letting accommodation in the same property. Few respite carers will receive more than the Rent a Room limit. Any respite carer may keep a detailed record of their income and expenses to calculate their profit if they prefer to opt out of the scheme.

2) FULL-TIME CARERS WITH 1-3 ADULTS

Normally the carer has to provide the resident with a room in the carer's only or main resident and these cases will, therefore, also usually qualify for relief under the Rent a Room scheme.

Enquiries may be received about the level of acceptable expenses from carers looking after 1-3 adults in their own home who would prefer not to keep records and who:

• opt out of the Rent a Room exemption; or
• receive more than the Rent a Room limit and do not elect for the Rent a Room alternative basis to apply.

The following guidelines should be followed in dealing with these enquiries with a view to saving individual carers the trouble of keeping records of expenses throughout the year:

• The allowable expenses of caring full time for one adult, many of whom have behavioural or learning difficulties, will be higher than those of having an ordinary lodger. The expenses are:
• £82 per week for the first resident (to reflect the increase in Rent a Room allowance).
• £66 per week for the second and third residents to (reflect inflation since the original figure was set).

For the purpose of ascertaining any profits Inspectors, may accept this amount as the weekly cost of caring for each adult without question.

• Before entering into discussions about expenses consideration should be given to whether any tax will arise. Caring is a full time activity and carers may have little other income. Personal allowances, can, therefore, be available, which taken into account with the level of expenditure which is immediately accepted, mean that no tax is due in a particular tax year unless circumstances change.
• The profits assessable for tax purposes will be the income received from caring less the allowable expenses. The normal Case I rules apply in calculating the profits. Payment for the carer's time or skill is not an allowable expense for tax purposes.
• The actual expenses incurred in caring will vary considerably depending upon the needs of the resident and the way in which the caring is organised by the carer. Higher expense claims might relate to:

• specific additional expenses over and above the basic weekly costs, for example, purchased services such as respite care or cleaning, expensive wear and tear or damage to the furniture or decorations, mortgage interest outside MIRAS, travel expenses or the costs of taking the resident on holiday;
• a general claim that the basic amount for allowable costs does not fully reflect the expenses incurred.

• Some local authorities provide breakdowns of payments made to carers that go into considerable detail. Caution should be exercised if a carer supplies one of these as an example of their expenses since they will often include payment for the carers time or skill. Some payments may be flagged by their description, for example, nursing, counselling or supervision and will not be admissible unless paid to a third party. Other amounts may also exceed the actual sums extended. For instance the amount attributed to food may have been calculated on a commercial basis to include the time spent in cooking and preparation. Laundry and cleaning costs may be similarly based.
• Carers may refer to the special arrangements that apply to foster carers and the lengthy list of non-taxable expenses that appear in the leaflet prepared by the National Foster Care Association ( BIM52755). It is accepted that these specific expenses are also non- taxable when incurred by adult carers for their residents but it is a question of fact which expenses have actually been incurred in an individual case and the amounts involved.
• In most cases it should be possible to reach agreement on broad brush lines without the requirement for detailed records of expenses provided the claims are reasonable and consistent with the particular needs of the resident concerned.
• Once the level of expenses has been agreed with a particular carer the agreement will normally remain in effect whilst the carer's situation stays broadly the same.

In cases of doubt the carer should be advised that payments for their time and skill are taxable and asked to keep a record of their actual expenses for a short typical period in order to arrive at the correct level of allowable expenses for tax purposes. The aim should be to arrive at the right figure with a minimum of fuss whilst achieving a result that is fair and consistent. Where agreement cannot be reached the carer should be told to keep detailed records of their income and expenses to arrive at the taxable profit. Any loss claim should be supported by detailed records.

There are organisations other than local authorities that operate arrangements similar to the Adult Placement Scheme. The arrangement with regard to record keeping should be extended to carers receiving payments from these organisations.

3) FULL-TIME CARERS WITH MORE THAN 3 ADULTS

These carers are required to keep records of income and expenditure in the same way as proprietors of nursing homes or boarding houses.