Foster Care Payments

It’s a bit poor that people providing a benefit calculator won’t attempt to explain the rules to you I feel.

I think this is due to the problems that have been around for years basically.

You can ask to be treated a self-employed in these circumstances and register as such with HMRC - see this thread Foster Carers and WTC If that was the case, then the foster payments would be treated as earnings.

However, if you don’t register as self-employed, then the payments should be disregarded as per CPAG et all, see Social Services payment because they’re not in the list of income that must be taken into account for UC.

How DWP might seek to treat such payments with a UC award is anyone’s guess though, given their ad hoc approach to many of these kind of issues.

Thanks for that-Yes it’s very poor from Policy in Practice.

So, the client is registered as self-employed and is looking after two 17 year olds.  Him and is wife are currently getting WTC of £90 per week.  As said, the client gets £740 per week fostering allowance from the local council.  They do not do any other work, just the fostering.
The WTC calculation I think has disregarded the whole of the £740 payments-are they likely to be issued with overpayments then?

Client is asking about going on UC and will he be better off-if I put that Cl is self-employed but no self-employed earnings in a similar way, then it suggests Cl will be better off by about £24 per week-Standard UC couple rate of £115.
But, you are saying that the foster allowance counts as self-employed income-so I should include all the income or as Policy in practice suggests, just income above the standard fostering amounts, which for this client is £194 per child per week.
Would it be stricter under UC in terms of having reviews/being expected to look for work?

thanks again!

I’m afraid that I don’t know about that.

For tax credits, they shouldn’t be overpaid because, in the absence of any other taxable income and using the simplified income tax rules for foster carers, only annual income above £36,000 would count towards their taxable income total (basic £10,000pa + £250 per child per week). As their income from fostering is £38,480, only £2,480 is counted and that is below the £6420 working tax credit threshold. Equally, it falls within the normal tax allowance so no income tax is due.

For Universal Credit, the approach has been the traditional means tested benefit route that fostering is not self-employment or other employment and the income is not earnings (see paragraph 28 of Schedule 8 to the ESA Regulations, for example). Whilst it would be nice to see something in the regulations specifically stating this, there is no doubt that UC does not see foster carers as self employed with self employed earnings.

Conditionality is an issue under UC as they will have to choose one of them as the “responsible foster parent” and even then (because the foster children are over 16) that person has to show that the young person has care needs that would make it unreasonable to meet a work search requirement (they will still have a work focused interview requirement). The other foster parent would have to satisfy the DWP that the young person or persons has/have care needs that would make it unreasonable to meet a work search requirement (they will still have a work focused interview requirement).

I think the reference to £194 per week may have soething to do with the income tax rules for foster parents, where the first £10,000 income from fostering is ignored per annum. However, you then need to add a further £200 (under 11 years old) or £250 per week (11 or older) per child that is placed with them

Thanks Brian for your comprehensive reply-that is very helpful.

The £194 per week was just the minimum allowance as per GOV.UK:

https://www.gov.uk/foster-carers/help-with-the-cost-of-fostering

Thanks also for your advice on conditionality and attending work focused interviews-I think I will advise them that it may be best to stay on tax credits!

I’m afraid Paul Treloar is wrong. All foster carers are obliged to register as self-employed as they receive payment for a service. However, the Qualifying Care Relief Scheme lifts most carers out of paying tax. Because HMRC treated foster care payments as earnings, it meant that foster carers could use their ‘work’ as foster carers to get WTC if eligible, especially when the taxable income from fostering, after QCR was applied, is zero or very small. See HMRC factsheet HS236 for confirmation.

DWP took a different view however - they have never treated foster care as work, even if the person is self-employed, and they have never taken the foster care payment into account as income.  This didn’t cause a problem in the good old days of IS/HB/income-related ESA and JSA etc. as DWP listed in the Regs and Guidance what didn’t count as income, and fostering payments (and other related odds and sods like Section 17 payments, Special Guardianship Order Allowances etc) were listed.

Under UC, the DWP took the approach they piloted with pension credit - nothing counts as earnings unless its listed. So now, in the guidance and regs, there is no mention of fostering payments and the rest. So you can spend fruitless hours looking for ‘proof’ that fostering payments are disregarded ...….and you wont find it. DWP staff fall into this trap too, so make it up as they go along instead.

Have a look at my Units factsheet on Tax and Benefits if you Foster or Adopt - http://www.hertfordshire.gov.uk/benefits, which is very similar to the benefit guides produced by Fostering Network (wonder why?).

Policy in Practice are wrong too!

Vaux - 28 February 2020 04:09 PM

Under UC, the DWP took the approach they piloted with pension credit - nothing counts as earnings unless its listed. So now, in the guidance and regs, there is no mention of fostering payments and the rest. So you can spend fruitless hours looking for ‘proof’ that fostering payments are disregarded ...….and you wont find it. DWP staff fall into this trap too, so make it up as they go along instead.

Perhaps you can tell me where the regs exclude such payments from being included as self-employed earnings?

Charles - 01 March 2020 01:07 AM

Vaux - 28 February 2020 04:09 PM

Under UC, the DWP took the approach they piloted with pension credit - nothing counts as earnings unless its listed. So now, in the guidance and regs, there is no mention of fostering payments and the rest. So you can spend fruitless hours looking for ‘proof’ that fostering payments are disregarded ...….and you wont find it. DWP staff fall into this trap too, so make it up as they go along instead.

Perhaps you can tell me where the regs exclude such payments from being included as self-employed earnings?

I agree with everything Gary has said in terms of my understanding of how DWP are operating things and that is certainly what they set out in their 2011 briefing note: https://www.thefosteringnetwork.org.uk/sites/www.fostering.net/files/resources/further-reading/universal_credit_policy_briefing_note_8_re_foster_carers.pdf

However, the one bit that has always bothered me is what stops them from coming under the self-employment provisions. There isn’t (as Charles says) a specific exclusion for foster carers either in terms of whether they are gainfully self-emloyed or to ignore the earnings as self-employed earnings. DWP never did provide an answer so i’m interested in the anser to Charles’ question!

Victoria

I think we can be reassured that DWP will not take payments for fostering into account at all - it is long-standing custom and practice and never seriously questioned.  But how do the UC Regs support this approach?

This is a strange one isn’t it.  The definition of “earned income” in Reg 52 has three limbs:

- contract of service or holder of an office
- trade, vocation or profession
- any other paid work

Reg 55 sets out the calculation of “employed earnings” from a contract of service/office.  Reg 57 deals with “self-employed earnings” from a trade, vocation or profession.  The minimum income floor only applies to a trade, vocation or profession (Reg 64).  The regulations appear to be entirely silent on the treatment of earned income from “other paid work”.  Does that mean it is taken into account in full under Reg 54, without any of the modifications provided for in Regs 55 and 57?  Or is it just not taken into account at all because there is nothing to say how it should be taken into account?

Does foster caring fall within any of the three types of earned income?  If so, does it belong only to the third type?  If so, should it be taken into account or not?  I think you could make out a case that fostering does not satisfy the first two limbs of the Reg 52 definition and so if the income is earnings at all it is covered by the third limb; that limb is otiose and so, in the absence of anything to govern how the allowance is taken into account as earnings, it isn’t.  That is a way of squaring the traditional treatment of fostering with the UC regs.

It would be a lot better if the position taken for UC was spelled out in the regulations but I note that even the definition of Foster Parent at regulation 2 refers to “a person with whom a child is placed under the Fostering Service Regulations 2011”, which itself is not, I think, legislation that actually authorises/enables the placement of a child with a foster parent. As the explanatory note says -

“They provide a regulatory framework for fostering agencies (that is, independent fostering agencies and voluntary organisations) and local authority fostering services, by placing duties on the ‘fostering service provider’.”

Foster parents are specifically mentioned in the UC Regs is in relation to conditionality and I would have thought that, if fostering was considered to be self employment for UC, there would be little need to specifically mention foster parents at regulations 89(1)(f) and 91, or alternatively, those provisions would themselves have to make reference to regulation 90 (i.e. in cases where regulation 90 does not apply ……)

But, I think we are all agreed, it would have been easier to make it crystal clear that foster parents are not considered to be self employed or receiving earnings for the purposes of UC

I really don’t see why their will be a problem with how UC treat the Fostering Allowance payment, because the second paragraph under the heading Foster Carers of DWP’s own internal guidance says -

” Foster children are not part of the benefit unit for Universal Credit assessment
purposes. Foster carers cannot receive an additional award for any foster child
because they receive a Fostering Allowance that is not taken into account when
assessing the Universal Credit award”

<http://data.parliament.uk/DepositedPapers/Files/DEP2019-0980/53._Foster_carers_v4.0.pdf>

A link to the guidance has previously been published on Rightsnet some time ago. Hope it helps,  DWP are telling their own staff fostering allowance is not taken into account.

Further down document is information about conditionality -as in other replies above this is why a couple need to decide who the lead carer is.

While the guidance does not give any references to regulations etc, it is in the public domain and is used by DWP staff!

HB Anorak - 02 March 2020 08:59 AM

I think we can be reassured that DWP will not take payments for fostering into account at all - it is long-standing custom and practice and never seriously questioned.  But how do the UC Regs support this approach?

This is a strange one isn’t it.  The definition of “earned income” in Reg 52 has three limbs:

- contract of service or holder of an office
- trade, vocation or profession
- any other paid work

Reg 55 sets out the calculation of “employed earnings” from a contract of service/office.  Reg 57 deals with “self-employed earnings” from a trade, vocation or profession.  The minimum income floor only applies to a trade, vocation or profession (Reg 64).  The regulations appear to be entirely silent on the treatment of earned income from “other paid work”.  Does that mean it is taken into account in full under Reg 54, without any of the modifications provided for in Regs 55 and 57?  Or is it just not taken into account at all because there is nothing to say how it should be taken into account?

Does foster caring fall within any of the three types of earned income?  If so, does it belong only to the third type?  If so, should it be taken into account or not?  I think you could make out a case that fostering does not satisfy the first two limbs of the Reg 52 definition and so if the income is earnings at all it is covered by the third limb; that limb is otiose and so, in the absence of anything to govern how the allowance is taken into account as earnings, it isn’t.  That is a way of squaring the traditional treatment of fostering with the UC regs.

Interesting argument!

Tax legislation considers fostering to either fall within a “trade, vocation or profession” or as casual income taxed under Chapter 8 of Part 5 of ITTOIA 2005. (See for example s.805(1)(c) of ITTOIA 2005.)

The “any other paid work” limb is interesting. I’ve always thought it would include casual work not developed enough to be a trade. As mentioned, tax legislation is clear that fostering sometimes falls within this. How it would be calculated I don’t know. There is a separate problem that such work is also included as “unearned income” by Reg 66(1)(m).

By the way, all the legacy benefits, besides for including provision to disregard these payments as income, also have provision to exclude them from being self-employed earnings, so DWP seem to accept the default position would otherwise be that it is self-employment.

LITRG - 02 March 2020 06:37 AM

I agree with everything Gary has said in terms of my understanding of how DWP are operating things and that is certainly what they set out in their 2011 briefing note: https://www.thefosteringnetwork.org.uk/sites/www.fostering.net/files/resources/further-reading/universal_credit_policy_briefing_note_8_re_foster_carers.pdf

Just providing an alternative link: https://webarchive.nationalarchives.gov.uk/ukgwa/20130402215846/http:/www.dwp.gov.uk/policy/welfare-reform/legislation-and-key-documents/welfare-reform-act-2012/welfare-reform-regulations/universal-credit-briefing/