Working tax credit
If the child for whom you care is looked after by the local authority and the local authority is paying towards the child’s accommodation and/or maintenance, s/he does not count as a dependent child for working tax credit (WTC) purposes.1Reg 2(2) WTC(EMR) Regs However, being a kinship carer of a looked-after child may help you qualify for WTC. In order to get WTC, you have to be in ‘qualifying remunerative work’. This means that you are working (either employed or self-employed) for a certain number of hours a week and fall into at least one of five categories (see below). If the local authority makes a payment to you, being a kinship carer of a looked-after child can count as self-employed work for tax credit purposes, except if you have legal parental responsibilities for the child – eg, as a result of a permanence order.2ss803-6 IT(TOI)A 2005; reg 4(1) WTC(EMR) Regs fourth condition; BIM 52755 and 52758 HMRC guidance states that kinship carers should be treated as ‘being in remunerative work’.3para 124100 TCM If you are a kinship carer of a looked-after child and you are refused WTC on the basis that you are not self-employed, seek further advice immediately. You may be able to claim WTC if:4Reg 4 WTC(EMR) Regs •you are aged at least 25 and work for at least 30 hours a week; or
•you are aged at least 60 and work for at least 16 hours a week; or
•you are a single claimant, you have a dependent child, and you work for at least 16 hours a week. If the local authority is paying you in respect of the child’s accommodation and/or maintenance, the child for whom you care as a kinship carer does not count as dependent for this purpose, but if you have a child of your own, s/he does count; or
•you are a couple, have a dependent child and your combined working hours are at least 24 a week. If the local authority is paying you for the child’s accommodation and/or maintenance, the child for whom you care as a kinship carer does not count as dependent for this purpose, but if you have a child of your own, s/he does count. If you both work, one must work at least 16 hours a week. If only one of you works, you must work at least 24 hours. Note: if you are a couple with a dependent child and the non-working partner is incapacitated, a hospital inpatient, in prison or entitled to CA, you can qualify if you work at least 16 hours a week; or
•you have a disability which puts you at a disadvantage in getting a job, and you work for at least 16 hours a week.
The effect of local authority payments
Under the HMRC tax relief scheme, if you are claiming WTC as a self-employed carer, up to £10,000 a year, plus £200 a week for each child under 11 and £250 a week for each child aged 11 or over, is not liable for tax. Local authority payments below these amounts are ignored as income for tax credit purposes.5Reg 19 Table 6 para 9 TC(DCI) Regs HMRC produces a helpsheet (HS236) on the tax relief scheme (available at ). If you claim WTC as a kinship carer, your WTC counts as income for any means-tested benefits you get – eg, HB or CTR.
If you are not claiming tax credits as a self-employed earner, but are getting tax credits anyway (eg, because you are employed or you have other children for whom you can claim CTC), local authority payments are disregarded as income.6Because they are not defined as income under reg 3 TC(DCI) Regs (confirmed for s50 and s22 payments in HMRC email to CPAG, 22 April 2009).