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HMRC internal manual

Business Income Manual

Care providers: shared lives carers for 2003-04 to 2009-10: establishing the profits

For the purposes of operating the simplified arrangements for 2003-04 to 2009-10, HMRC divided shared lives carers into four categories. The arrangements for each category applied as follows.

Respite carers

Many carers looked after vulnerable people in their own home for only a short period, perhaps to give a close relative or another carer a break. Although it was regarded as principally a voluntary service, the carers did receive small payments on a daily basis for each person. Under the arrangements, respite carers were divided into two sub-categories based on the number of days of care in a year. The number of days care provided in a year was calculated by adding up the number of days care per adult per year.

The first was made up of those who provided no more than 182 days of care in a particular tax year. These carers were treated by HMRC as having no taxable profits to return.

The second category of respite carers was made up of those who provided more than 182 days care in a year. The same rules applied to these respite carers as applied to full time carers with 1-3 adults (see below).

Example 1

If a carer provided 45 days care for one service user and 63 days care for two further users, this would give a total of 45 + (2 x 63) = 171 days. The carer would have less than 182 days care in that year and would therefore not have to return any taxable profits.

Example 2

If a carer provided 100 days care for two service users, this would give a total of 100 + 100 = 200 days. The carer would have more than 182 days care in that year and would therefore have to return any taxable profit using the rules for full time carers with 1-3 adults.

Day carers

This was similar to respite care but the care tended to be provided for only a few hours per day and any payment was normally intended to defray the expenses of the carer. Under these arrangements, the carer choose between one of the following methods:

  • The fixed expenses method. Under this method the carer could deduct from the amount received fixed expenses of £15 per day per individual. If the total of the fixed expenses was more than the amount received, the taxable profit was nil. If the total of the fixed expenses was less than the amount received, then the difference was treated as the taxable profit.
  • The profit method. Full records were maintained and taxable profits for the year were arrived at by deducting allowable expenses (and capital allowances) from the amount received.
  • The sampling method. A record of regular expenses was maintained for a period of three months and then multiplied up. This total was then added to other allowable expenses to arrive at a total for the year. This amount was then deducted from the amount received to give a figure of taxable profits for the year.

Full time carers with 1-3 adults or young people

Normally, the carer had to provide the resident with a room in the carer’s only or main residence. These cases continued to qualify for relief under the rent-a-room scheme (see PIM4000 onwards). However, claiming this relief was usually to the carer’s disadvantage if their total receipts from shared lives care exceeded the rent-a-room limit.

Some carers looked after 1-3 adults or young people in their own home and preferred not to keep records, but:

  • opted out of the rent-a-room exemption; or
  • received more than the rent-a-room limit and did not elect for the rent-a-room alternative basis to apply.

HMRC accepted that the allowable expenses of caring full time for one adult, many of whom would have had behavioural or learning difficulties, would be higher than those people having an ordinary lodger. Case workers were instructed to accept the following minimum expenses and allowances as the weekly cost of caring for each placement:

  • £400 per week for the first adult,
  • £250 per week for the second and third adults.

Alternatively, an acceptable figure could have been arrived at by asking the carer to record their actual expenses over a short, typical period in order to arrive at the correct level of allowable expenditure for tax purposes. Once the level of expenses had been agreed with a particular carer, the agreement would stay in force whilst the carer’s situation remained broadly the same.

In the unlikely event that no agreement could be reached on an appropriate level of expenses or if the carer so wished, then taxable profits should have been calculated using a full set of records.

Full-time carers with more than 3 adults or young people

The normal trade profits computational rules applied so these carers were required to keep records of income and expenditure in the same way as proprietors of nursing homes or boarding houses.