Mentally Handicapped Children (Special Care Allowance)

HC Deb 27 January 1977 vol 924 cc1683-4

5. Mr. Hannam

asked the Chancellor of the Exchequer if he will make a statement on the Inland Revenue's decision to tax the special care allowance paid to foster parents of mentally handicapped children.

Mr. Robert Sheldon

Payments made to foster parents by certain local authorities may, in some cases, be taxable as the receipts of a profession or vocation. In these circumstances, tax is charged only on the excess of the payments over expenses incurred in looking after the foster child.

Mr. Hannam

Is it not highly desirable on social and financial grounds that severely handicapped children should be taken into family life by foster parents rather than remain in expensive institutions? Should not the foster parents, therefore receive the same attendance allowance as would be given if the child were being cared for by its own parents?

Mr. Sheldon

I fully accept the point, but the only instances in which tax is chargeable concern those foster parents who are professionally engaged. They are charged tax, but they can obtain their personal allowances as an offset.

Mr. George Cunningham

If the special care allowance is taxed, why is not tax also payable on the special care allowances given to members of another place in the form of attendance allowances? Are not those allowances completely contrary to all normal tax rules since they are paid tax free?

Mr. Sheldon

I understand the similarity that my hon. Friend feels exists between the two kinds of attendance allowances. The allowances originally referred to in the Question are not taxable. It is only those who bring professional expertise to bear—for which other allowances are made—against whom extra charges are made. We are not dealing here with ordinary foster parents, but with a limited special category.

Mrs. Bain

Does the Minister agree that any method of taxing such allowances will be regarded as being similar to the taxation of widows? Have not the cutbacks in public expenditure badly affected needy sections of the community? Can we have an assurance that there is some humanity in the Treasury?

Mr. Sheldon

I am aware that a number of local authorities take a lenient view of this matter, and perhaps the hon. Lady also knows of them. I have attempted to state the position in law. I offer the hon. Lady what assurances I am able to offer on the last part of her question.