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.
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.