Hi Sandra
The DWp and HMRC do not recognise the term family and friends fostering allowance. In their language a fostering allowance is simply a payment made by a local authority for a "looked after child", who is a child subject to a care or supervision order, or accomodated under sections 20. 23 or 24A of the Children Act 1989. You therefore need to check whether the child falls within this, or whether the payments are something like residence order payments, special guardianship payments, or discretionary payments made under section 17 of the Act.
If the child is indeed looked after, the fostering is work as far as HMRC is concerned and the gran can claim WTC on the strength of it. Effectively she would be working over 30 hours for zero taxable income under the special rules for fostering income. There is a pile of stuff on the HMRC website and I could dig out the links if you need them.
If the child is not "looked after" the gran could probably claim CB/CTC.
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