Income Tax (Trading and Other Income) Bill

House of Commons

Session 2004 - 05
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Income Tax (Trading and Other Income) Bill

Income Tax (Trading and Other Income) Bill
Part 7 — Income charged under this Act: rent-a-room and foster-care relief
Chapter 2 — Foster-care relief
346

804
Person who qualifies for relief
(1)
An individual qualifies for foster-care relief for a tax year if the individual—
(a)
has foster-care receipts for the tax year (see section 805), and
(b)
does not derive any taxable income other than foster-care receipts from
a relevant trade or arrangement.
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(2)
“Taxable income” means receipts or other income in respect of which the
individual is liable to income tax for the tax year.
(3)
A relevant trade or arrangement is one from which the individual derives
foster-care receipts for the tax year.
Basic definitions
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805
Meaning of “foster-care receipts”
(1)
For the purposes of this Chapter an individual has foster-care receipts for a tax
year if —
(a)
the receipts are in respect of the provision of foster care,
(b)
they accrue to the individual during the income period for those
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receipts (see subsections (2) and (3)), and
(c)
the receipts would otherwise be brought into account in calculating the
profits of a trade or chargeable to income tax under Chapter 8 of Part 5
(income not otherwise charged).
(2)
If the receipts would otherwise be brought into account in calculating the
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profits of a trade, the income period is the basis period for the tax year (see
Chapter 15 of Part 2).
(3)
Otherwise the income period is the tax year.
806
Meaning of providing foster care
(1)
For the purposes of this Chapter foster care is provided if an individual—
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(a)
provides accommodation and maintenance for a child, and
(b)
does so as a foster carer.
(2)
An individual is a foster carer if the child is placed with the individual under
any of the following enactments, unless the individual is excluded by
subsection (5).
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(3)
The enactments are—
(a)
section 23(2)(a) or 59(1)(a) of the Children Act 1989 (c. 41) (provision of
accommodation for children by local authorities or voluntary
organisations),
(b)
regulations under section 5 of the Social Work (Scotland) Act 1968
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(c. 49),
(c)
section 70 of the Children (Scotland) Act 1995 (c. 36), and
(d)
Article 27(2)(a) or 75(1)(a) of the Children (Northern Ireland) Order
1995 (S.I. 1995/755 (N.I. 2)) (provision of accommodation for children
by authorities or voluntary organisations).
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(4)
An individual is also a foster carer if—

Income Tax (Trading and Other Income) Bill
Part 7 — Income charged under this Act: rent-a-room and foster-care relief
Chapter 2 — Foster-care relief
347

(a)
the individual is approved as a foster carer by a local authority or a
voluntary organisation in accordance with regulations under section 5
of the Social Work (Scotland) Act 1968 (c. 49), and
(b)
the child in respect of whom the accommodation is provided is being
“looked after” by a local authority within the meaning of section 17(6)
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of the Children (Scotland) Act 1995 (c. 36),

unless the individual is excluded by subsection (5).
(5)
The following are excluded individuals—
(a)
a parent of the child,
(b)
an individual who is not a parent of the child but who has parental
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responsibility (or, in Scotland, parental responsibilities) in relation to
the child,
(c)
if the child is in care and there was a residence order in force with
respect to the child immediately before the care order was made, an
individual in whose favour the residence order was made, and
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(d)
(in Scotland) if the child is in care and there was a residence order or
contact order in force with respect to the child immediately before the
child was placed in care, an individual in whose favour the residence
order or contact order was made.
807
Calculation of “total foster-care receipts”
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For the purposes of this Chapter, in calculating an individual’s “total foster-
care receipts” for a tax year, no deduction is allowed for expenses or any other
matter.
Individual’s limit
808
The individual’s limit
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(1)
For the purposes of this Chapter an individual’s limit for a tax year is the total
of—
(a)
the fixed amount for the tax year or, if section 809 or 810 applies, the
individual’s share of that amount, and
(b)
each amount per child for the individual for the tax year (see section
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811).
(2)
For the purposes of this Chapter the fixed amount for a tax year is £10,000.
(3)
The Treasury may by order amend the sum for the time being specified in
subsection (2).
809
Share of fixed amount: residence used by more than one foster carer
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(1)
This section applies if in a tax year—
(a)
the residence used to provide the foster care from which an
individual’s foster-care receipts for the tax year are derived is also used
by another individual to provide foster care, and
(b)
the other individual also has foster-care receipts for the tax year.
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(2)
Each individual’s share of the fixed amount for the tax year is the fixed amount
divided by the total number of individuals who—
(a)
use the residence in the tax year to provide foster care, and

Income Tax (Trading and Other Income) Bill
Part 7 — Income charged under this Act: rent-a-room and foster-care relief
Chapter 2 — Foster-care relief
348

(b)
have foster-care receipts for the tax year.
(3)
In this section “residence” means—
(a)
a building, or part of a building, occupied or intended to be occupied as
a separate residence, or
(b)
a caravan or houseboat.
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(4)
If a building, or part of a building, designed for permanent use as a single
residence is temporarily divided into two or more separate residences, it is still
treated as a single residence.
810
Share of fixed amount: income period not a year
(1)
This section applies if in a tax year an individual’s income period for the
10
individual’s foster-care receipts is a period other than a year.
(2)
The individual’s share of the fixed amount for the tax year is—

where—
AS is the fixed amount or (if section 809 applies) the individual’s share of
the fixed amount, and
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D is the number of days in the individual’s income period.
811
The amount per child
(1)
An individual’s amount per child for a tax year is found by multiplying—
(a)
the number of weeks during the income period for the tax year in which
the individual provides foster care for the child, by
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(b)
the weekly amount for the child.
(2)
The weekly amount for a child is—
(a)
£200 for a week throughout which the child is under 11 years old, and
(b)
£250 for other weeks.
(3)
The Treasury may by order amend any amount for the time being specified in
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subsection (2).
(4)
If an individual provides foster care for a child during an income period for
only part of a week, the part is treated as a whole week.
(5)
If an income period begins or ends during a week, the week is treated as falling
within the income period ending during the week.
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But if there is no such income period, the week is treated as falling within the
income period beginning during the week.
(6)
A week is a period of 7 days beginning with a Monday.
Relief if amount does not exceed limit
812
Full foster-care relief: introduction
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Sections 813 and 814 (which give the full form of foster-care relief) apply if—

Income Tax (Trading and Other Income) Bill
Part 7 — Income charged under this Act: rent-a-room and foster-care relief
Chapter 2 — Foster-care relief
349

(a)
an individual qualifies for foster-care relief for a tax year,
(b)
the individual’s total foster-care receipts for the tax year do not exceed
the individual’s limit for the tax year, and
(c)
sections 822 and 823 do not apply (accounting date for trade not 5th
April).
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813
Full foster-care relief: trading income
(1)
This section applies if the individual’s foster-care receipts for the tax year
would otherwise be brought into account in calculating the profits of a trade.
(2)
The profits or losses of the trade for the tax year are treated as nil.
814
Full foster-care relief: income chargeable under Chapter 8 of Part 5
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(1)
This section applies if the individual’s foster-care receipts for the tax year
would otherwise be chargeable to income tax under Chapter 8 of Part 5
(income not otherwise charged).
(2)
For each arrangement from which those receipts arise, the amount of—
(a)
those receipts arising in the tax year from the arrangement, less
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(b)
any expenses associated with them,

is treated as nil.
Alternative calculation of profits if amount exceeds limit
815
Alternative calculation of profits: introduction
Sections 816 and 817 (which provide for an alternative method of calculating
20
profits) apply if—
(a)
an individual qualifies for foster-care relief for a tax year,
(b)
the individual’s total foster-care receipts for the tax year exceed the
individual’s limit for the tax year,
(c)
sections 822 and 823 do not apply (accounting date for trade not 5th
25
April), and
(d)
an election by the individual has effect to apply the alternative method
of calculating profits for the tax year (see sections 818 and 819).
816
Alternative calculation of profits: trading income
(1)
This section applies if the individual’s foster-care receipts for the tax year are
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the receipts of a trade.
(2)
The profits of the trade for the tax year are—
(a)
the individual’s total foster-care receipts for the tax year, less
(b)
the individual’s limit for the tax year.
817
Alternative calculation of profits: income chargeable under Chapter 8 of Part 5
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(1)
This section applies if the individual has foster-care receipts for the tax year
which are chargeable to income tax under Chapter 8 of Part 5 (income not
otherwise charged).

Income Tax (Trading and Other Income) Bill
Part 7 — Income charged under this Act: rent-a-room and foster-care relief
Chapter 2 — Foster-care relief
350

(2)
The amount charged for the tax year arising from all the arrangements from
which the receipts are derived is—
(a)
the individual’s total foster-care receipts for the tax year, less
(b)
the individual’s limit for the year.
818
Election for alternative method of calculating profits
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(1)
An individual may elect for the alternative method of calculating profits given
in sections 816 and 817 to apply if—
(a)
the individual qualifies for foster-care relief for a tax year,
(b)
the individual’s total foster-care receipts for the tax year exceed the
individual’s limit for the tax year, and
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(c)
sections 822 and 823 do not apply (accounting date for trade not 5th
April).
(2)
An election under this section—
(a)
must specify the tax year for which it is made, and
(b)
has effect for that year (unless withdrawn by notice given by the
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individual).
(3)
An election or notice of withdrawal under this section must be made or given
to the Inland Revenue on or before—
(a)
the first anniversary of the normal self-assessment filing date for the tax
year for which the election is made, or
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(b)
such later date as the Inland Revenue may, in a particular case, allow.
819
Adjustment of assessment
(1)
This section applies if—
(a)
an individual does not make an election under section 818 for a tax year
on or before the date for making the election, and
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(b)
an adjustment is made after that date to the profits from the
individual’s provision of foster care on which the individual is liable to
tax for the tax year.
(2)
The individual may make an election under this section to apply the alternative
method of calculating profits given in sections 816 and 817 for the tax year.
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(3)
The election—
(a)
must specify that tax year, and
(b)
has effect for that tax year (unless withdrawn by notice given by the
individual).
(4)
An election or notice of withdrawal under this section must be made or given
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to the Inland Revenue on or before—
(a)
the first anniversary of the normal self-assessment filing date for the tax
year in which the adjustment is made, or
(b)
such later date as the Inland Revenue may, in a particular case, allow.