Statement of Practice 15 (1980)
Published 14 November 1980
© Crown copyright 1980
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Where a court order requiring a former spouse to make maintenance payments direct to his/her child, who is living with the other spouse, includes an element to cover the cost of school fees of that child it is sometimes the practice for the payment of those fees to be made direct to the school under the order which would normally be in the following form:
“that that part of the order which reflects the school fees shall be paid to the [headmaster] [bursar] [school secretary] as agent for the said child and the receipt of that payee shall be sufficient discharge”.
Provided this order reflects what is happening in practice tax relief will be given to the payer for these payments which will form part of the taxable income of the child. Changes to the taxation of maintenance payments introduced by the 1988 Finance Act mean that no relief is available to the payer unless the order requiring payments to the child was made:
- (i) by 30 June 1988, on an application to the Courts made before 15 March 1988 or
- (ii) to replace, vary or supplement such an order which in itself requires payments direct to the child
Where relief is available, the payer’s tax relief is limited to that available for 1988 to 1989, even if the payments increase in later years. The child’s liability to tax on the income is similarly limited to the amount which was taxable in 1988 to 1989.
The HM Revenue and Customs (HMRC) view of the circumstances which will properly reflect the presuppositions of such an order and of the responsibility for establishing that such circumstances exist are as follows:
- the onus will be on the parties themselves to produce evidence, where requested, that the person receiving the school fees has agreed to act as agent for the child and that the contract for the payment of the fees (which will most easily be proved if in writing) is between the child (not the spouse making the payments) and the school
Changes to the tax rules for maintenance payments mean that relief for payments direct to children will no longer be available from 6 April 2000.
Note: the text of Statement of Practice 15/80 above is as it appears in HMRC’s Statements of Practice as published on 30 January 2012, this statement is now of limited scope. See now Income and Corporation Taxes Act 1988, s. 347A for payments due under orders made after 14 March 1988. In respect of payments due in 1989 to 1990 and subsequent years of assessment under orders made before 15 March 1988, see FA 1988, s. 38.