Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Business Income Manual

HM Revenue & Customs
, see all updates

Care providers: qualifying care relief: introduction

S803-S828 Income Tax (Trading and Other Income) Act 2005

You can find simple introductions to qualifying care relief for foster carers and shared lives carers on the HMRC Internet site by searching on ‘qualifying care relief’, ‘foster carers’ or ‘shared lives carers’. There is also a Tax Return helpsheet for qualifying carers which you can find on the HMRC Internet site by searching on ‘HS236’. You may find it helpful to look at these introductions before reading the detailed guidance in this section of the BIM.

A special relief, ‘qualifying care relief’, is available to individuals who, alone or in partnership, provide:

  • foster care (see BIM52755) but not shared lives care (see BIM52758);
  • shared lives care but not foster care; or
  • both foster care and shared lives care.

Profits made by an individual in a tax year from the provision of qualifying care are deemed to be nil for Income Tax and Class 4 NICs purposes if his or her total receipts from qualifying care do not exceed an individual qualifying amount.

Individuals whose total receipts from qualifying care exceed their qualifying amount can choose between:

  • calculating their taxable profits in the normal way on total receipts less actual expenses and capital allowances (the ‘profit method’); or
  • treating as their taxable profit the amount by which their total receipts from foster care exceed their qualifying amount, without any separate relief for expenses or capital allowances (the ‘simplified method’).

Whichever method is used, the carer is chargeable to Income Tax and Class 4 NICs on those profits.

In the absence of the relief, profits from qualifying care provision would be chargeable to Income Tax either as the profits of a trade or as miscellaneous income in the normal way.

For calculation of the qualifying amount, see BIM52765.

For information on capital allowances, see BIM52770. The interaction with Capital Gains Tax is described at BIM52770. Shared lives carers for 2009/10 and earlier years

Qualifying care relief applies to shared lives carers only for 2010-11 onwards. However, HMRC operated simplified arrangements for certain shared lives carers for 2003-04 to 2009-10. These arrangements are described at BIM52785 onwards. For 2010-11 only, shared lives carers could choose between the previous arrangements and qualifying care relief.