NIM21026 | Class 2 National Insurance Contributions: Small Earnings Exception: Special Groups: Foster parents

Someone who was self-employed as a foster parent under an agreement with a local authority or charitable organisation may not have produced accounts. They could have received payments made up as follows:-

• Basic boarding allowances which were reimbursements of costs incurred directly as a result of fostering. These were not regarded as earnings for SEE purposes.

• Additional enhancement allowances, which were reimbursements of extra identifiable expenses resulting from fostering, eg because a child was incontinent or needed a special diet. These were not regarded as earnings for SEE purposes.

• Reward elements, which were payments made over and above the reimbursement of costs and recognised the time and skill used by a foster parent in caring for the child(ren). These payments were regarded as earnings for SEE purposes.

Some local authorities and charitable organisations did not calculate their fostering payments by the method above but, instead, negotiated an all-embracing fee. Normally, the foster parent produced evidence of the agreed profit for tax purposes in the relevant past year.

Payments for fostering were generally made to the wife and were entered as her earnings in any tax returns. In such cases, the reward element (or accepted profit) was regarded as the wife’s earnings for SEE purposes. Like business partners, however, spouses could apportion the earnings to their best advantage, eg to qualify for SEE. A written statement to this effect was available. It showed the date from which the arrangement for apportioning earnings began, and how long it lasted.