Managing direct payments for someone else - tax implications

JoMich

Hi, I hold a LPA for an elderly friend who has dementia and Parkinson's so can't manage his own money. I pay bills from his account and keep records which works okay. As his capital has all but been used up, he has now been awarded direct payments for the care he needs. The local authority demands that these are paid into a separate bank account to his existing ones but due to his mental capacity, he can't open a new account and the bank won't allow me to do so on his behalf. The local authority say I have to open an account in my own name but I am worried that this will look like I have a whole income stream that I am not declaring and could affect my tax status. I am aware that I would be able to prove the money is paying for his care but I don't want the hassle of  a self assessment each year as I am medically retired and live on a pension that is taxed at source. I feel thoroughly bullied by social care who I think should support him with this not me! (now I feel awful for complaining about it!)

poppy12345

I'm surprised that the local authority haven't arranged their own bank account for this because they will need access to it as well and i don't just mean access to send the payments, i mean access as in "see the payments being made." Once this is done they will send the details to you for you to access it through a secure portal.

I managed my daughters direct payments for a few years and never had to physically open my own account for this. Personally i would go back to them and ask the question because it seems odd that they're asking for your friend to arrange his own bank account.

JoMich

Thanks Poppy12345, I've spent a couple of days speaking to various people in the local authority. They are very clear that I need to open my own account, I have tried to explain my concerns but they just say I can 'tell HMRC and there won't be a problem' which hasn't ever been my experience of them! I imagine different local authorities have different processes. 

poppy12345

They may well be different but i just find it very odd that they expect you to open another bank account for these payments to go into. Direct payments are not taxable income anyway and neither do they affect any benefits you may already be claiming.

Nannytone

I use a managed account, set up by the payroll company.
I have no access to the account and dont even k ow what bank the direct paymenrs are paid into.
Its by far the simplest way to deal with it