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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
Updated
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Care providers: qualifying care relief: foster carers: examples

Example 1

Mr Jones provides foster care for one fourteen year old for the whole of the year and one eight year old for ten weeks of the year. No other foster carers live in his house. His annual accounting date is 5 April. His qualifying amount will be made up as follows:

Fixed amount £10,000
   
Child 1 (52 x £250) £13,000
Child 2 (10 x £200) £2,000
TOTAL £25,000

If Mr Jones had total receipts from foster care of £30,000 and incurred allowable expenses of £22,000, he can choose between being taxed on:

  • £8,000 (£30,000 receipts less £22,000 expenses) using the profit method, or
  • £5,000 (£30,000 receipts less £25,000 qualifying amount) using the simplified method.

On the other hand, if Mr Jones had total receipts from foster care of £20,000, his receipts from foster care would be exempt for the year. This is because his total receipts are now less than his qualifying amount.

Example 2

Mrs Smith’s annual accounting date is 30 September. She provides foster care for one fifteen year old for the whole of the year to 30 September and one six year old for twenty weeks of that year. No other foster carers live in her house. Her qualifying amount for the year will be made up as follows:

Fixed amount £10,000
   
Child 1 (52 x £250) £13,000
Child 2 (20 x £200) £4,000
TOTAL £27,000

 

If Mrs Smith had total receipts from foster care of £32,000 and incurred allowable expenses of £22,000, in calculating her profits for the basis period to be declared on her Income Tax return, she can choose between being taxed on:

  • £10,000 (£32,000 receipts less £22,000 expenses) using the profit method; or
  • £5,000 (£32,000 receipts less £27,000 qualifying amount) using the simplified method.

On the other hand, if Mrs Smith had total receipts from foster care of £20,000 for the year ended 30 September, her receipts from foster care would be exempt. This is because her total receipts are now less than her qualifying amount.