Gratuitous/Informal Care Payments from a VPT

Trusts Discussion
1

Hello,

I’m looking for views on making informal/gratuitous care payments to family members from a VPT.

Beneficiary is autistic. There is no Deputy - just the Trustees.

I am aware of the HMRC guidance confirming that payments to anyone other than the vulnerable beneficiary are normally subject to the annual limit of the lower of £3,000 or 3% of the trust fund, but my question is whether, where the beneficiary has capacity and directly wishes a family member to provide their care instead of commercial carers, can trustees characterise such payments as care expenditure “for the beneficiary”, rather than as a distribution to a third party, so that the £3k/3% rule is not engaged? This is assuming that there is a detailed letter of wishes accompanying the Deed setting out requirements re care diaries/time sheets and a reduction in hourly rate to reflect that care is not commercial. Or, in practice, will payments to family carers always fall within the HMRC cap unless reimbursing strict expenses?

Given that there are no issues re capacity, is it possible that capital for care is paid to the beneficiary and then paid to the family member for care provided?

Would welcome any practical experience or HMRC‑facing examples.

Thanks

Caitlin

2

I know this isn’t answering your question but I think it is worth mentioning that the payments to the family carers will probably fall to be treated as taxable earned income (the trading allowance / NIC may also apply). I am not sure how they would be gratuitous if they are directly linked to whether on not care is provided.

I am not sure what sort of caring activities would be involved but would the carer be wise to take out insurance? Would they be able to do that if they don’t have the necessary training/ qualifications? What about car mileage expenses / insurance? Are they being paid for driving the beneficiary to places? Does their car insurance need to reflect that?

I am sure there is a lot more to consider that I am not aware of. To me it would be much cleaner to find a professional carer that the beneficiary gets on with and keep family as family.

All sounds potentially messy to me.

Good luck

Sara

Sara Spencer ATII TEP | Trust Manager

www.trustandestate.co.uk

Sara Spencer Ltd, 8 Kingsway, Harrogate, HG1 5NQ

07952 651881 | 01423 524114

Sara.spencer@trustandestate.co.uk

Privacy Notice - details of our legal basis for processing your information, retention period for data held, security of your data, your rights under the General Data Protection Regulations (GDPR) including the right to complain can be found in our full Privacy notice

This email and the information contained in it and in any attachments are confidential and may be privileged. If you have received this email in error please notify us immediately. If you are not the intended recipient, you are not authorized to, and must not use, disclose, copy, distribute, retain or rely on this email or any part of it.

Please note that whilst we try to ensure that attachments are virus-free, we cannot accept responsibility for situations where this is not the case.

Any information in this email is advice from the business and not the sender.

Sara Spencer Ltd is a company registered in England, registration number 12304408, registered office 8 Kingsway, Harrogate, HG1 5NQ