Gratuitous Family Payments or Family Care Payments

[Pete R]

I thought I would start a new thread on this to open up a discussion as it has been suggested numerous times on TP over the last few months that a recent court case has now allowed family members to be paid to provide care and be automatically exempt from having to pay tax and NI on those earnings which is not correct.

The case in question is detailed here…..
http://www.courtofprotectionhub.uk/cases/the-public-guardian-v-cc-2015-ewcop-29
The OPG objected to a Lay Deputy paying themselves just over £1000/month to care for his Mother. There were other points regarding the ongoing costs of renovating a property but are not really relevant with the main problem being the lack of proper record keeping by the Donor.

Since no other family members objected to the Donors action and praised his care the Judge decided the previous care payments were OK and imposed a future limit of £15,000/year. This sum was reached as a result of the Mothers saving being under £10,000 & income of £22,225/year judged to be sustainable. This amount is not set as a precedent but could maybe used as a guide for similar circumstances.

Such payments have been around for a very long time in serious personal injury compensation claims where as well as a lump sum a yearly amount for on going costs is paid and the Deputy has applied to CoP for some of that money to be paid to a family member who is acting as carer.

HMRC accept these payments as “Voluntary Payments” and therefore not income so is not taxable or subject to NI.
https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm4016

However that ruling only applies to payments made under an order of the CoP so will not apply in all circumstances.

Even though HMRC do not count the payment as income and I imagaine they have to be informed regardless, the benefits system may well do so and this could then affect such things as Carers Allowance.

In view of the ruling all payments made by Deputies to family members are being reviewed.

The OPG has issued guidance which states……
https://www.gov.uk/government/uploa...24111/PGnote_2016_05_family_care_payments.pdf
“The guidance applies to deputies appointed by the court under a finance and property
order. The position of attorneys acting under a lasting or enduring power of attorney will depend on the specific powers granted under the power. However, attorneys may
find the factors to consider a useful guide when making best interest decisions about
payments for care.”

On reading that I thought it was advising Attorneys that if you follow to terms of the guidance then all is well but “specific powers” had me puzzled.

I contacted the OPG helpline and after consulting with a manager I was told that “specific powers” meant that if there was a stipulation on the LPA (and therefore approved on registration) stating that the donors funds could be used to pay a family member for care then it would be OK to do so.

If no stipulation existed the the only alternative was to apply to CoP for permission.

I emailed CoP asking…
“The OPG has issued guidance notes on Family Care Payments in which it states that “Lay Deputies” who provide care and pay themselves should seek Court of Protection approval to avoid a breach of their fiduciary duty.

I contacted the OPG to ask about the position of Attorneys with Lasting Power of Attorney in relation to Family Care Payments and they stated that the Attorney would have to apply to CoP for approval.

Can you please tell me how to go about this process?”

They replied……
“The forms for the application are:
COP1 / COP1E / COP24 (giving a narrative / stating proposals / exhibiting documents) / £400 application fee (cheque made payable to HMCTS), or an application for a fee remission on form COP44A.
You should also enclose a copy of the Registered Power of Attorney or the Deputy order.

The COP24 should include a Schedule of the total assets / liabilities / income / outgoings / financial details of the Protected Person - Donor.
Yours faithfully
Court of Protection Enquiries“

I would imagine that CoP are going to get very busy indeed as Attorneys apply for retrospective permission or maybe they will just decide to stop the payments as the costs & effort involved with applying is not in the best interests of what is left of the Donors funds.

I contacted one firm of solicitors in Manchester whose website claimed they specialised in this and could help "in certain circumstances" but they would not discus it on the phone and wanted £240 for an hours consultation.

I thought (and still do) that having a Donor nominate an Attorney to act in their best interests that this sort of decision would be OK but apparently maybe not.

 

[Beetroot]

It's a very interesting point Peter. Suppose, in due course, the pwd became unable to care for the relative for any reason and so the pwd had to go into a care home. If they eventually ran out of money, would social services be able to claim the pwd or attorney on their behalf, deliberately reduced their cash so we're not going to cough up for fees just yet? Or would the fact that the CoP said it's ok anul such a claim? If it would, maybe those of us who really don't need the cash should do it as well as those who do and tuck the cash away to fund top up fees in the future.

 

[Selinacroft]

Just a thought on this matter- or more a question but if someone were to use up enough capital to require a SS financial assessment, would SS just look at current balances or would they have a legal right to delve into someone's old financial history? - if so how far back and what if the account had been closed? Surely if someone has dementia they couldn't be expected to remember closed accounts?

 

[Kevinl]

The ewcop29 case isn't a particularly good on to quote because I never worked out how to CoP said;
"Concerns
The OPG’s concerns were:
1. A report in 2009/10 stated that CC was paid £1,300 a month for the care he provided to P. P’s property had a value of £120,000;
2. A report in 2010/11 stated that £41,999 had been spent renovating P’s property; £9,439.65 was spent on CC’s deputyship expenses, and £15,600 had been spent on care fees. The property was now worth £150,000;
3. A report in 2011/12 stated that CC spent £17,745.75 renovating the property and £17,260 had been spent on care fees;
4. In addition to the concerns regarding the renovation and care costs, CC was vague about the annual expenditure and lack of evidence to support it;
5. CC could not account for the expenditure nor that the expenditure was made to meet P’s needs, and for her best interests;
6. The OPG’s fees were outstanding;
7. CC failed to seek the court’s approval for the significant expenditure.

So the house had more spent on it that it increased in value, by quite a lot, CC took nearly £10 in expenses and £15.6K on care fees while they were caring, they were vague about the annual expenditure and couldn't account for the money nor prove it went to meet P's needs, never paid the OPG fees and didn't seek their approval.

So you do all that and "The court authorized the payments in relation to the care services retrospectively." not even a slap on the wrist in fact CC got a pay rise "The court authorized ongoing payments to CC not to exceed £1,500 per month" CC only got £1,300 before the case. That is one of the strangest set of facts as presented.
The OPG set out to "to revoke the appointment of a deputy in relation to property and affairs as the deputy has behaved in a way that was outside their authority and not in the Patient’s (‘P”) best interests." and CC get's a pay rise and all the odd things that happened retrospectively approved.
I am working on the actual question that is that does it matter if you're a deputy or not? So far my answer is no, in some other rulings the consideration is what was in the persons best interest not the status of the person they gave the money to, could it be that all carers are free to enter into a GFP irrespective of deputyship or not, none of the rulings I can see make it conditional on that.
If it is the case that as we know the CoP allow it and HMRC recognise it as tax and NI free then why don't more of us do it?
I can see why the LA might not like and I can see why other siblings may disagree but "s/he can stay at my house for £500 a week or go into a care home at double that" you decide might be a persuasive argument, although it might cause some family rifts to put it mildly.
I can see how the government wouldn't like it they save billions by letting families do the caring, what if you could get paid to do it...interesting.
it is beyond doubt legal the CoP and HMRC say so we just need the circumstances to be defined.
K

 

[Pete R]

Just a thought on this matter- or more a question but if someone were to use up enough capital to require a SS financial assessment, would SS just look at current balances or would they have a legal right to delve into someone's old financial history? - if so how far back and what if the account had been closed? Surely if someone has dementia they couldn't be expected to remember closed accounts?

The Financial Assessment can go as far back as it wants.

There are ways of checking for old closed accounts but I would think it rare that they would go to that much effort without a good reason.

 

[Pete R]

It's a very interesting point Peter. Suppose, in due course, the pwd became unable to care for the relative for any reason and so the pwd had to go into a care home. If they eventually ran out of money, would social services be able to claim the pwd or attorney on their behalf, deliberately reduced their cash so we're not going to cough up for fees just yet? Or would the fact that the CoP said it's ok anul such a claim? If it would, maybe those of us who really don't need the cash should do it as well as those who do and tuck the cash away to fund top up fees in the future.

I do think you are going a tad to deep into Deliberate Deprivation.

 

[Pete R]

I am working on the actual question that is that does it matter if you're a deputy or not? So far my answer is no, in some other rulings the consideration is what was in the persons best interest not the status of the person they gave the money to, could it be that all carers are free to enter into a GFP irrespective of deputyship or not, none of the rulings I can see make it conditional on that.

How on earth do you reach that conclusion? You have been asked at least twice before to provide some evidence to back up your argument and have failed to do so.

Of course it matters if you are a Deputy or Attorney as otherwise the CoP would not be involved would they? The CoP are involved as Deputies/Attorneys have certain obligations with regards to finances and best interests. All the rulings deal with decisions by Deputies. Which ones do not?

Someone who needs care and who has capacity to decide who they want to provide that care can pay a family member if they wish. They can call the payment whatever they like but it will not be classed by HRMC as a Gratuitous Family Payment as it has not (and cannot) be authorised by the Court as per ESM4016. There are other Tax exceptions relating to family members in the Employment Status Manual where there is no mention of GFP.

it is beyond doubt legal the CoP and HMRC say so we just need the circumstances to be defined.
K

The circumstances are already defined and it is totally beyond doubt that Gratuitous Family Payments made by Deputies have to be authorised by the CoP to qualify for Tax exemption under ESM4016.

It really is quite simple.

 

[Beetroot]

I do think you are going a tad to deep into Deliberate Deprivation.

 

[Siberian66]

Hi all, I see this is an older thread but I wonder if any members have gained any further experience recently in getting OPG/COP approval to care for a family member, along with the financial implications of using the donors funds for family care, as opposed to the donor paying care home fees?

Just finding a solicitor with the insight to take on this challenge with any sort of certainty of outcome appears to be difficult even with the example cases in the OPG Family Care Payments publication.

 

[Katykartweel]

I was wondering the exact same thing; has anyone been through this process in gaining CoP authorisation for family payments. Also seeking a solicitor for advice.....

 

[TNJJ]

I always have felt that if it is written on the LPOA with it being the wishes of the donor it is their wish..

 

[Siberian66]

Hi all, I wanted to come back to this thread as I have have completed the COP process to gain permission to care for my mother and receive care payments. I imagine all cases are different but my experience might be useful to other forum members.

I started my journey in late 2019, finding it hard to find a Solicitor to take my case on. I eventually did an internet search for something like 'Carer's can be paid, dementia, UK' and found a Solicitor with a relevant Web Blog. The Solicitor was located a long way from me so we never met in person but with video meetings, emails and phone calls the experience was good and the Solicitor we used excellent.

Our legal process started in August 2020. I wanted a deed of trust so my mum could buy a share of my home (to enable us to remain there until her passing) and family care payments. I had already been looking after mum for 12 years of which 6 were 24/7 constant care in my own home. I gave up paid employment to do this and my mum supported my household financially.

We applied to the COP and my mum was assigned a Litigation Friend (The Official Solicitor), The Court Process took 15 months including postponements for further information requests, office moves, holidays and myself to assemble evidence. I had to organise professional witness reports on my mums condition, life expectancy, medical history and the roll I played in my mums care. We had to apply for retrospective approval back 6 years + and engaged an accountant to provide all the historical financial figures.

We received or final judgement in August 2022 with approval of all of my actions and use of my mums money historically and approval of care payments and lodgings costs going forward. The outcome for me was good and the COP process reflected the OPG's guidelines. Basically the system did what it said on the tin.

On a personal level the process was stressful and nerve wracking as I had such a lot riding on our case. My sibling who lives overseas was very upset about my plans, especially the Deed of Trust which involved selling mums investment property which I helped her buy when she moved in with me. In the end I Scrapped the Deed of Trust and we moved home with my mum (during the Court process) so that we could move forward. My sibling was in agreement with everything else however as we had planned everything together with my mum six years before. We sold the investment property anyway as I was unable to keep up with the legal costs and my mums tenant gave notice.

The Court process was very rigorous and every angle is looked at. Both of mums solicitors could not agree at times. Any sort of disagreement between siblings is a really bad thing.

The financials in our case were quite substantial.
- Solicitor £50,000
- Official Solicitor circa £14,000
- Professional witnesses about £3,000

We provided evidence that my mum was better off by £250,000 living with me when compared to living in a care home at £1,000 per week, over the six year period. Our professional witness valued my input providing one-to-one care at £64,480pa.

It was suggested by the OS that I should be paid £25,000pa which was great news and also virtually mirrored the financial support my mum had given me previously as retrospective approval. Mum paying her 1/3 share of the utilities and food bill. Mum paid the legal costs too and I was allowed to re-coup the money I lent her.

I hope the above is useful to anyone looking to gain COP approval. TNJJ has really nailed it though; get as much in writing as possible; all care scenarios, approved first, when registering the LPA, so much easier.

 

[TNJJ]

Hi.Well done! Some good news at last?