Keywords: Payments for care from family members; deputyship
This case, heard by Senior Judge Lush, provides an exemplar of the process of calculating and authorising payments (sometimes known as ‘gratuitous care’ payments) made from privately held funds on behalf an individual who lacks capacity to manage their finances towards the cost of maintenance of a family member, who is providing care and case management services.
In this case, Helen (an adult with epilepsy and acquired brain injury) had received in 2006 a personal injury settlement in relation to a clinical negligence claim, which included both a lump sum of £600,000 and a periodical payment initially set at £25,000 (and increased over time in line with increases in the Retail Price Index (RPI)). Helen’s NHS-funded care was being provided in her own home (bought on her behalf out of the lump sum) by a team of 8-10 carers. Helen’s brother, Adrian, had, in 2006, given up his fulltime job as a team leader in a chemical manufacturing company to work full time as Helen’s carer and case manager: serving as her deputy (and previously as her receiver); liaising with professionals involved; advocating for Helen; planning her care; recruiting, managing and overseeing her team of support workers; carrying out administrative work on her behalf; and providing direct care to her.
Adrian had been receiving a ‘gratuitous care’ payment of £23,000 from Helen’s funds and the authority of the court was sought to authorise past payments retrospectively and to authorise ongoing payments from this point on. As deputy, Adrian needed the authorisation of the COP to pay himself this allowance from Helen’s funds because there is a conflict of interest in such payments between the deputy’s fiduciary duty to P and the deputy’s benefit from the payment (8.58 MCA Code of Practice explains the nature of the fiduciary duty of deputies and the implications in these circumstances).
The court considered:
(a) whether these payments to Adrian were in Helen’s best interests, including considering whether the care was (i) reasonably required and (ii) of a high standard;
(b) whether the payments were affordable, taking into account Helen’s resources, age and life expectancy
(c) whether the payments represent a saving on the commercial cost of similar services [They would normally be expected to do so. In Re HC  EWCOP 29, Senior Judge Lush set out a broad approach of taking the commercial cost of care as a ceiling and reducing by 20% (to take account of the lack of tax payable on such payments – see below).]
In this case, the court ordered a specialist report from a professional brain injury case manager to evaluate and quantify the care and case management services Adrian provided to his sister. The specialist report concluded that Adrian was providing services worth at least double the proposed £23,000 per annum payment and that the care he was providing was “an absolute asset” to his sister and of a very high standard.
Senior Judge Lush clarified that such payments are not subject to income tax or national insurance payments, because they cannot be considered income of the recipients because no enforceable contract exists. He quotes the HMRC Employment Status Manual which describes the tax status of such an allowance as follows:
“ESM4016 – Particular occupations: care workers – payments under Court of Protection Order or from trust fund
Payments towards the cost of maintenance of a husband, wife or other close relative or dependant out of the income of a severely incapacitated person who receives funds under an order of the Court of Protection are regarded as voluntary payments and not as income of the recipients. Therefore, there will be no tax or National Insurance Contributions consequences on such payments made for caring duties. Similarly, where payments emanate out of a Trust Fund set up for this purpose there is unlikely to be an enforceable contract, therefore, there should be no question of tax being assessable as employment income or of a liability for Class 1 NICs. Caring activity under these circumstances would not be gainful employment so there will be no liability for Class 2 NICs. The services provided are unlikely to be regarded as commercial in nature or amount to valuable consideration so there will not be a charge to tax on trade profits or on income not otherwise charged to tax.” [para. 38]
Given the large gap between the commercial cost of similar services and the actual payment received by Adrian, Senior Judge Lush concluded that the cost of frequent review was not justified and that no further review was needed until 2022, or such time as there was a change in circumstances.
The judgement makes reference to a forthcoming OPG practice note on family care payments which has now been published. That practice note clarifies that, in OPG’s view, professional deputies can normally authorise such payments to family members without seeking a specific order from COP in uncontentious cases where they can demonstrate having followed a best interests process. However, OPG advises lay deputies to seek a COP order for payments to themselves and/or individuals they are closely connected to, due to the conflict of interest with their fiduciary duty.
Full case at: http://www.bailii.org/ew/cases/EWCOP/2015/77.html
OPG practice note on family care payments: https://www.gov.uk/government/publications/public-guardian-practice-note-family-care-payments