Tax liability on gift to pay for carers in the home.

TheGoldfish

My mother is hopefully returning home after 6 months in hospital, care home and hospital again. She will need a carer several times a day for some time and a very good friend of hers has offered to pay for the carers but is worried there is a tax liability.

Is there a tax liability on this friend or my mother for giving my mother cash to pay for the carers? Don't know the amount involved but possibly over £3000 a year.

If so, would the friend paying the carers directly solve this?

If not, what would be the best thing to do?

I have read on one website that someone can pay for another person's care without any tax liability provided the funds come from surplus income and not from savings. Is this right?

Any help appreciated. 

Jeremy535897

There is no liability on cash gifts in the UK by a donor, unless they exceed the nil rate band, which is at least £325,000 (plus any exemptions) in the seven years before the donor's death, in which case there could be a charge. It's not something to worry about. Each donor can give away £3,000 a tax year under the annual exemption, and there is a "normal expenditure out of income" exemption which is what you mention (although the rules are complex).

A more important question is whether the carers will be employees of your mother and subject to PAYE.

TheGoldfish

Jeremy535897 said:

A more important question is whether the carers will be employees of your mother and subject to PAYE.

Thanks for the reply. Before going into hospital my mother had a carer for 30 minutes every morning and this was arranged through social services. My mother has slightly over the allowed threshold in savings so had to pay. We are hoping to continue with this where the care company invoices social services and they invoice my mother.

Is the £3000 that each donor can give away a total or per recipient? 

Jeremy535897

A donor has one annual exemption of £3,000. If any part of the previous year's annual exemption is unused, that may be carried forward for just one year.

In addition, gifts to individuals totalling no more than £250 per recipient per tax year are exempt (but not if the recipient also received gifts within the annual exemption).

Keep_pedalling

TheGoldfish said:

Jeremy535897 said:

A more important question is whether the carers will be employees of your mother and subject to PAYE.

Thanks for the reply. Before going into hospital my mother had a carer for 30 minutes every morning and this was arranged through social services. My mother has slightly over the allowed threshold in savings so had to pay. We are hoping to continue with this where the care company invoices social services and they invoice my mother.

Is the £3000 that each donor can give away a total or per recipient? 

The £3000 is not a limit, it is an IHT exemption. You can give away as much as you like but if you gift more than your exemptions then it stays as part of your estate for 7 years. If your mother’s friend is going to be paying this from excess income the regardless of the amount it all becomes exempt.

There is no tax implications at all for your mother, but her friend needs to document all her gifting to make life easier for her executor.

Robert_McGeddon

TheGoldfish said:

 My mother has slightly over the allowed threshold in savings so had to pay. We are hoping to continue with this where the care company invoices social services and they invoice my mother.

Is it worth considering your Mum paying for care herself until under the LA limit? Then LA should take over, at least in part.

Friend's gifting could then be to Mum direct, at a lower level.