CPAG in Scotland Tax Credits Project: Factsheet 17

Tax Credits and Foster Carers

Introduction
Who are foster carers?
Child tax credit
Working tax credit
Income rules
Further information and advice

Introduction

This leaflet considers some issues about child tax credit and working tax credit that are relevant to foster carers. The information in this leaflet is not relevant to foster carers with ‘private fostering’ arrangements (see below).

Who are foster carers?

Fostering is where a child is being cared for in a family home by carers who do not have parental responsibility for her/him. There are two types of fostering:

• public fostering
• private fostering

The difference depends on who makes the arrangement for the child to live with the foster carers.

Public fostering is where the local authority arranges for the child to live with foster carer/s. This can be done directly by the local authority’s own fostering service, or through an arrangement with a voluntary organisation (eg, Barnardos or Action for Children).

Private fostering is where a parent arranges for their child to live with another person who is not a relative for more than 28 days. In private fostering arrangements there are no special tax credit rules. If you are a private foster carer you may be able to claim child tax credit for the child you care for. Our leaflet, Tax credits – the basics, outlines the basic tax credit rules and explains how to claim CTC.

The rest of this leaflet is aimed at ‘public’ foster carers.

Child tax credit

You can get child tax credit (CTC) for a child you are ‘responsible’ for who normally lives with you. You are not treated as responsible for a child who the local authority is providing with accommodation (this could be through an independent fostering provider) and paying towards her/his maintenance under certain legislation (section 23 of the Children Act 1989 or section 26 of the Children (Scotland) Act 1995).

This means you cannot get CTC for a foster child if you get foster payments. If you are also caring for a child who you are not fostering (eg, your own child) you can still get CTC for that child.

The amount of CTC you get for your own child is not affected by foster payments unless these are above a certain level (see Income rules below).

Working tax credit

To qualify for working tax credit (WTC), a claimant must be in full-time paid work – called ‘remunerative work’ by the Revenue. The number of hours required per week depends on the circumstances (see below). You count as being in remunerative work if you are either employed or self-employed and working for payment or in expectation of payment. Foster carers are generally treated as self-employed.

So if you are working as a foster carer, you can claim WTC if you are working for at least:

• 16 hours a week and you are responsible for a child other than a foster child, (eg, you have a child of your own as well as a foster child) or
• 16 hours a week and are a disabled worker, or qualify for the ‘50+ element’, or
• 30 hours a week in other cases, if you are aged 25 or over

See our leaflet, Tax credits – the basics, for more about these rules.

It is the number of hours a person normally works that counts. Revenue guidance says that the hours of work a foster carer declares on her/his claim form should normally be accepted. If someone does more than one job, the total hours are added together. So if a foster carer is doing work in addition to foster caring, the hours from the other work can be included.

The Revenue says that someone who is self-employed can include not only hours spent providing services, but also those that are necessary for self-employment, such as cleaning the business premises and book-keeping.

Income rules

The general rule is that it is taxable income that is taken into account in calculating your CTC and WTC. This includes income from employment and self-employment. Fostering allowances which qualify for tax relief are ignored: currently up to £10,000 per year (plus £200 per week for each child under 11 and £250 for each child 11 or over) if a local authority or independent fostering provider places a foster child with someone.

Further information and advice

CPAG in Scotland Tax Credits Project summary webpages

Child Poverty Action Group in Scotland
0141 552 0552 advice line for advisers on benefits and tax credits,
Monday, Tuesday, Wednesday and Thursday 10am to 12pm

Email: advice@cpagscotland.org.uk
email advice for advisers on benefits and tax credits

Website: www.cpag.org.uk
for more tax credit leaflets from CPAG in Scotland

CPAG publishes the Welfare Benefits and Tax Credits Handbook, a comprehensive guide to benefits and tax credits for claimants and advisers.

CPAG in Scotland’s advice line is only for advisers. If you are having problems with your own tax credit or benefit claim and are in need of advice you should contact your citizens advice bureau or other local welfare rights service.

HM Revenue and Customs (formerly the Inland Revenue)
Tax Credits Helpline 0845 300 3900
(textphone 0845 300 3909)
Website: www.hmrc.gov.uk

© Child Poverty Action Group, April 2009
CPAG in Scotland’s Tax Credit Project is funded by the Scottish Government.

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