Social Care want to make payments to cover the support element of rent (not eligible for Supporting People or CCA payments) for a 18 year old care leaver. Will be funded from leaving care budget.
It looks to me as though anything over the 'rent a room scheme allowance' will be taxable income and thus income for Tax Credits for landlord, but would welcome any opinions!
(Can not see it as disregarded income in Reg 19 of the Tax Credits regs 2002.)

Does your LA operate an Adult placement scheme approved by NAAPS that you could use (provided the carer is not a close relative)? If so the taxable profit for Income Tax and Tax Credit purposes can be calculated using a very advantageous simplified scheme. This will probably result in the carer having no taxable profit. The provision of adult placement care is also viewed by HMRC as qualifying work for WTC purposes, as it is for foster carers. Have a look at the following links.

http://www.hmrc.gov.uk/individuals/adult-placement-carers.htm
http://www.hmrc.gov.uk/manuals/bimmanual/BIM52785.htm
http://www.hmrc.gov.uk/manuals/bimmanual/BIM52805.htm

Thanks so much - very useful information.