The clause provides income tax relief for particular payments to special guardians, which I understand not to mean those in respect of whom local authorities have legal powers in terms of looking after children, but guardians who do not have full adoptive rights and where there are ongoing and retained rights by birth parents. The clause also makes changes in respect of other carers looking after children placed under residence orders—certain kinship carers. For those unfamiliar with the technical term, kinship carers are grandparents, aunts, uncles and so forth who look after children. The exemption, which I gather will be similar to the current tax arrangement, for payments to those who have an adopted child will apply only to qualifying carers and will have an effect on payments received on or after 6 April. Qualifying payments are payments made in relation to a special guardianship or residence order either by the child’s parents, or on behalf of the local authority, to a qualifying carer.
Qualifying carers are those who care for a child or children placed under them with a special guardianship or residence order when the carer is not the child’s parent or step-parent. Kinship carers looking after a child who has not been placed under a residence order are not qualifying carers for the purpose of the exemption, but will be entitled to the new income tax relief for shared lives care, as we discussed earlier. Will the Minister explain a little more about that treatment of kinship carer arrangements without the residence order and why such carers would not be eligible in such circumstances? There are currently special income tax rules for foster carers, those who have adopted a child and shared lives carers.
I have been told that the decision to tax carers who take on legal parental responsibility for a child in a similar way to those who have adopted a child follows informal consultation about the new income tax relief for shared lives carers. That was set out in Budget press notice 37 when the announcement was made. Will the Minister tell the Committee what that informal consultation about the new income tax arrangements involved? Whom did the Treasury consult? I am slightly wary when I see the phrase “informal consultation” in a formal policy announcement because there is a risk that although officials have their own particular networks, they might not extend their tentacles to organisations that might have a worthwhile and legitimate say but are perhaps excluded. I would prefer more formal consultation arrangements, or at least advertising on websites that are likely to be visited by those with a particular interest.
I am also interested to know whether the Minister’s officials are in touch with the relevant bodies—the Local Government Association, the Association of Directors of Social Services and, when relevant, housing bodies and other organisations involved in shared lives care policy—to ensure that there is widespread notice of the changes being made and that those new arrangements are kept under review. What is the Minister’s view on that point and can he put clause 2 in context?
Again, I am grateful for the hon. Gentleman’s comments. He described what clause 2 is about: essentially extending the scope of the existing exemption from income tax on certain payments made to support adoptive parents. From 6 April 2010, the exemption from income tax will also apply to similar payments made to support individuals who are not adopters but instead provide care for a child under the terms of a special guardianship or residence order. It brings into line the tax treatment of payments made to support individuals who take on parental responsibility for a child, thus putting the tax treatment of those payments on to a sound statutory basis.
The exemption replaces an extra-statutory arrangement that allowed a carer to substitute a fixed rate of expenses for the actual costs of providing care. As with clause 1, the measure was announced by the previous Government in last year’s pre-Budget report on 9 December 2009. We published the clause in draft during the summer and it has been welcomed by carers and their representatives.
The hon. Gentleman asked about the treatment of kinship without a residence order. The kinship circumstances do not include the same parental responsibilities, but those with parental responsibilities will qualify.
In practical terms, the responsibility of kinship carers, especially grandparents, is equally expensive and has an impact on those carers’ overall family income. Not everyone wants to seek a residence order or believes that to be necessary, and going through the courts for such an order might be expensive. Many people carry out such tasks, so would it not be reasonable to include them? They may be receiving payments under an agreement, for example, although a residence order is not in place.
I am grateful for that intervention, but there are differences when particular parental responsibilities and costs are involved. Some people may qualify as having parental responsibilities, but the kinship approach is a slightly different test. The hon. Lady raises an interesting point, and I appreciate the reasons why some carers may not seek a full residence order arrangement with parental responsibilities. None the less, we believe that our approach is reasonable.
I do not want to become over-sidetracked into a full debate on this point, but it is right to highlight the fact that a kinship carer without a residence order may qualify for shared lives care. That is a slightly different arrangement.
It is possible for a kinship carer to qualify for shared lives care, even if the cared-for person is a child. That is still available.
On the informal consultation, the hon. Member for Nottingham East asked whom we consulted. The organisations involved included the Fostering Network, the National Association of Adult Placement Schemes, the fostering and adoption team at the Scottish Executive, the low income tax reform group, the then Department for Children, Schools and Families and the Department of Health. I hope that that provides some reassurance that there was considerable consultation.
I noted that the hon. Gentleman said that he preferred a formal rather than an informal process, but it is helpful at times to have an informal process. Indeed, it is right that the Treasury and HMRC consult informally as much as possible to ensure, particularly in an area with a strong relationship with the then DCSF and the Department of Health, that we can work across Government in a co-ordinated way. It is fair to say that clause 2 has been welcomed. Despite the lengthy consultation, it has not been the subject of great criticisms or concerns.
I wish to pursue further the matter of kinship carers. At the very least, we have a complex set of provisions. In the interests of simplification, they could be looked at again. It might be the case that a kinship carer is eligible for relief under shared lives care, but that is not self-evident to the average person, which might cause difficulty. There is also a placement cap for the numbers who might be cared for regarding shared lives care. We now have the opportunity to look further at this huge provision of care in many communities. A number of people perform such functions, which are identical in practical and financial terms whether or not they are subject to a legal order. If the Minister does not want to address these matters as part of the passage of this Bill, perhaps he will give a commitment to look at them in the future.
The hon. Lady brings considerable expertise to the debate. The clause is helpful in the case of special guardians and those in receipt of residence orders. It is welcomed by all members of the Committee. She raises some wider points of policy that I do not intend to cover in this debate, but she has put some interesting and important points on record.
The debate has been useful because it has shed a little light on the different treatment of special guardianship arrangements and kinship carers, although I am not sure whether, in the process of clarifying the arrangements, we have revealed more complexity. I am still not quite convinced of the justification for treating a kinship carer in a different financial way from that for other care arrangements. If necessary, we will want to return to the issue on Report. After listening to the Minister’s illuminating words, however, I shall not object to clause 2 at this stage. We will reserve our right to return to the matter, but it will be useful to see whether his officials can think a little further about it in the weeks to come.
Although I do not want to become over-sidetracked into kinship and shared lives, it might be helpful for the Committee to know—perhaps I should have pointed this out earlier—that HMRC will be publishing a draft statutory instrument as soon as possible to cover this issue. Given the points raised by the hon. Member for Edinburgh East, I am sure that she will study the statutory instrument closely.
I will have to inform the hon. Gentleman of that in due course. He asks a fair question, but I am sure that he is pleased that a statutory instrument is on its way.