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Foster parents accounts

aatmemberaatmember New MemberRegistered Posts: 13
Dear All

Does anyone have experience on preparing Foster Parents' accounts.

Thanks in advance.



  • coojeecoojee Experienced Mentor Registered Posts: 794
    I didn't realise being a foster parent was considered self employment. I thought the money they receive was for them to keep, I didn't know they had to keep accounts. Seems a bit odd. What do they do, apportion the weekly shopping bill, heat, light etc? Do they pay tax if they make a profit? Wouldn't that then mean it was in their interest to spend as little as possible on the foster child so that they could keep the "profit"
  • coojeecoojee Experienced Mentor Registered Posts: 794
    Wow, just had a quick read up on it and they do indeed get taxed on profits! Well you learn something new everyday! I wish I got paid:

    "Reward elements, which are payments made over and above the reimbursement of costs and recognise the time and skill used by a foster parent in caring for the child(ren). These payments are regarded as earnings for SEE purposes."

    for looking after my own kids. Clearly I don't use time and skill to care for my own. Only a "professional" can do that.
  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    I never realised that either!
  • RinskeRinske Font Of All Knowledge Registered Posts: 2,453
    coojee wrote: »
    for looking after my own kids. Clearly I don't use time and skill to care for my own. Only a "professional" can do that.

    Maybe you should put your kids into foster care and then get them back as foster parent(s)? At least you wouldn't have to worry about the child benefits that disappear :lol:
  • burgburg Experienced Mentor GloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,440
    I have experience of the rules as my in-laws have 4 foster children. When you take into account Foster Care Relief rules it's rare to have to produce the accounts if they are fostering through the local authority but can occur when fostering through a private agency.

    What would you like to know? If you would rather pm me then feel free.

  • aatmemberaatmember New Member Registered Posts: 13
    Hi and Thanks


    Thanks to all for their input. As they say, everyday is a school day.

    Right, i am trying to establish if a self assessment needs to be completed for someone I know that does foster caring. After posting this thread i did some research on the HMRC site and found it to be a slight mine field.

    From my understanding now, there is a relief available for foster parents as from August 2008 (I should say it does state on the HMR&C site that this is not available to private foster care arrangements), which is know as "Foster Care Relief". There appears to be two reliefs available, which is 1, an exemption from submitting any self assessments if your receipts from foster care do not exceed the qualifying amount. The exemption is automatic and does not need to be claimed, or 2, an optional simplified method of calculating profits if your receipts from foster care do exceed the qualifying amount.

    The qualifying amount is calculated as follows: all foster parents would get a base relief of £10,000 (if both foster parents are registered then that would be £5,000 each) + (wks x either £200 if child is < 11 or wks x £250 if the child is > 11). Now it appears that what is receipted in this situation works out to be less than the qualifying amount, so I have concluded that there is no need to submit any self assessments at all.

    It does appear that all foster parents, apart from the private arrangement are classes as self employed, but if their income falls below the qualifying value then the IR take a view that for taxation purposes you will be treated as having no profit or loss from foster care for the year, so this alleviated any issues for Class 2 and Class 4 NIC. It appears that if a foster parent is deemed to have made a profit, then the NIC issues would come into play…

    Like I say, I was wondering if anyone out there had experience in this area to give advice. I have concluded on my situation that a self assessment is not required, but I’m not a specialist in this area so wondering if I had missed anything. It doesn’t help when the person doing the fostering phoned the revenue last week asking if they need to pay tax on the income from this.. The revenue’s answer was “you need to pay tax on all income earned irrespective”….

    Thanks in advance

  • burgburg Experienced Mentor GloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,440
    Your post is effectively correct.

    A private fostering arrangement is one say where one person arranges for someone else to care for their children. Foster care relief is available to carers who operate through the local authority or independent foster agencies.

    Here is a link read paragraph one for the above http://www.hmrc.gov.uk/individuals/foster-carers.htm

    The qualifying amount is as you described. Should they go above the qualifying amount then they most choose from two further options for declaring income:-

    Option 1 - Receipts less payments
    Option 2 - Receipts less qualifying amount (usually the best option)

    Don't forget that Fostering qualifies as 'qualified paid work' for Working Tax Credits and should be claimed if they qualify. The relevant income for Tax Credits is the same as for Self Assessment so will be nil in most cases. Child Tax Credits and Child Benefit cannot be claimed for foster children but can still be claimed for the carers own children.

    Small Earnings Exemption for Class 2 NI applies if there income is under the threshold as you mentioned.

    Hope this helps and I will be pleased to help further if I can.

  • aatmemberaatmember New Member Registered Posts: 13

    Many thanks for your info and yes I did find it extremely useful.

    Now looking at it I do feel that I have made the right judgement in as much that a self assessment is not required in this instance.

    One interesting aspect though that you highlighted is that the people whom are concerned with the fostering no longer have their biological dependants living at home. Are you saying that as a foster parent, per se, in principle, they would be entitled to claim working tax credit should their combined income be below the government threshold?

    Would this be based on the fact that a foster parent could be deemed as being “the legal guardian”? In this instance they have had the same child for three years , and she is now attending full time education and will do for the next two academic years?

    Kind regards

  • aatmemberaatmember New Member Registered Posts: 13

    Sorry Ian, I was going to pm you, but since there were comments at the beginning of this thread stating that some people weren’t aware of this relief I thought I’d keep it public so other whom were interested could keep abreast of progress.

  • burgburg Experienced Mentor GloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,440
    No worries about the PM Barry. It was just for if there were aspects that would be more specific and not really suitable for a public forum.

    To claim WTC you do not have to have children you must:-

    'You are entitled to claim Working Tax Credit provided that you or your partner are in ’qualifying paid work’ for at least 16 hours a week if you have a child of your own, or 30 hours a week if you do not. Foster caring is ’qualifying paid work’.'

    Therefore if with there other income they are still below the limit for claiming then they may do so.

    CTC & CB require the child to be either your own or I think adopted.

  • aatmemberaatmember New Member Registered Posts: 13
    Ok, thank you Ian. I will explore that avenue.

    Many thanks again for taking the time to give a detailed explanation.

    Kind regards
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