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Adult placement carers will soon be able to claim only- or main-residence tax relief when they sell their property.
Up until now, this has not been available on any part of a house that is used exclusively for the purposes of a trade, business, profession or vocation (TCGA 1992, s 224(1) and (2)).
Where a person cares for an adult under a local authority placement scheme, the contract with the local authority may require the individual to set aside one or more rooms exclusively for the use of the adult in care.
In such a case, s 224 may prevent only or main residence being available on that part of the property.
New legislation to be included in the Finance Bill 2010 will remove this possible restriction.
The fact that part of the home is occupied by the adult in care will not prevent the relief being available on that part, which can therefore be treated as part of the carer’s only or main residence.
A new income tax relief for qualifying shared lives carers is also being introduced from 6 April 2010.
Such carers provide accommodation, care and support for up to three individuals who have been placed with them under a local authority shared lives placement scheme. The new relief will be similar to the current foster care relief.
Currently, HMRC provide simplified income tax arrangements for some shared lives carers, known currently as the simplified arrangements for adult placement carers.
These include a fixed rate of expenses, depending on the number of placements and the type of care provided, and a tax exemption for respite carers providing up to 182 days care a year.
The new relief will replace the simplified arrangements for adult placement carers. In the meantime, adult placement carers can continue to use the simplified arrangements.
The tax free allowance will be available to households, and consists of:
- £10,000 fixed amount a tax year;
- £200 a week (or part week), for each placement aged under 11; and
- £250 a week (or part week), for each placement aged 11 or over.
Qualifying shared lives carers, whose total receipts from providing care do not exceed the tax-free allowance for the year, will be exempt from income tax on their income from providing shared lives care. Those whose total receipts from providing care exceed the tax free allowance for the year, will be able to choose to pay tax on:
- their total receipts from providing care less the tax free allowance; or
- their actual profits computed using the normal tax rules for businesses.
Where there is more than one carer in the household, the household may provide care to a maximum of three shared lives placements, and the allowance will be shared equally between the carers.
The new relief will be based on the existing Foster Care Relief (ITTOIA 2005, Chapter 2 part 7).
If the carer is entitled to both foster care relief and the relief for shared lives carers the household will only be entitled to claim one £10,000 fixed amount per year.
If their total income from providing foster care and shared lives care is less than the combined relief, then they will not be taxed on their income from providing care.
If their total income from care is more than their combined relief, they will be able to choose the simplified method for calculating their profits, if they wish.
The number of shared lives placements a carer has will not include any children they foster.
