Previous threads about this agreed that ROA's under para.15 Sch.1 Children Act were disregarded under para.11, Reg.19 TC (Definition nad Calculation of Income) Regs. I think everyone assumed they were non-taxable as well.

I also mentioned before that some Social Services Departments were planning to transfer, or had transferred already, some kinship carers receiving fostering allowances onto ROA's.

To continue the story - see this new guide by HMRC on income tax for foster carers - http://www.hmrc.gov.uk/individuals/foster-care-relief.pdf.

The paragraph on residence orders says:

Residence Orders
Payments under residence orders are non-taxable where local authorities make them on a discretionary and gratuitous basis. However, payments made under contractual arrangements may be taxable. For example, where a local authority contracts to continue making payments to a foster carer in return for the carer agreeing to take on a new legal responsibility for the child, there will be a legal entitlement to receive the payments. We would generally regard such payments as taxable income. Such payments will fall outside foster care relief, but the simplified arrangements for adult placement care may apply.

That's income tax but it seems to me that HMRC could use the same argument for TC - in effect that ROA's for transferred foster parents are not payments under para.15, Schedule 1, but payments under a contract.

I assume the quote above is a matter of HMRC interpretation rather than new regulations but if anyone with more knowledge than me of income tax law is able to comment, that would be very helpful.

And if anyone knows of their local SSD planning transfers of this kind, this needs flagging up urgently.

Richard Atkinson
Wirral Welfare Rights Unit

Provided there is no possibility of detriment to the children, I believe there is a general trend towards transferring children from foster care to residence order arangements because this avoids the LA's ongoing responsibility for care. I am having the same debate here about whether residence order payments are contractual. I would argue not because the LA can set its own criteria for making payments, decide the formula and vary it, but then I'm not a lawyer. For the time being I'm advising clients to ask social workers to provide a letter saying they are discretionary. Exactly the same point arises with adoption allowances and special guardianship payments. I notice that some LAs are rebranding adoption allowances as "discretionary adoption payments" presumably for this purpose.

Can we keep each other posted please?

Raises the question of how the Revenue would identify the contractual top-up element, unless they were specifically informed this was a separate amount to any Residence Order Allowance ordinarily payable.

Presumably the authority for making such a payment remains para 15 schedule 1 in either case, so a claimant could legitimately maintain that the whole thing should be disregarded.

I think the guidance makes it clear where the Revenue stand on the subject - but whether a tribunal/Commissioner would agree may be another matter.