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A new report from the Low Incomes Tax Reform Group (LITRG) finds that more help and joined-up government are needed if the move towards direct payments and individual budgets is to be effective as it could be.
‘Direct payments’ are cash payments made directly to the bank account of vulnerable people as an alternative to more traditional forms of care, such as in a residential home. Local authorities are now obliged to offer direct payments to all in need of appropriate levels of care.
In 2005-06 there were over 45,000 users of direct payments in the UK, including disabled adults, younger persons, carers of disabled children, and older people. It is the government’s intention that the number of users should rise significantly in the next few years.
A consequence of direct payments is that if the money is used to pay a personal assistant or carer, the user becomes an employer and is therefore obliged to operate PAYE and NIC and undertake other obligations of an employer. This is not always made known to users when they have to choose between direct payments or a more traditional form of care.
The technicalities of PAYE, NIC, national minimum wage, and other aspects of being an employer, present many difficulties for direct payments users. Things are made worse by the lack of customer services targeted for users, and the fragmented nature of government involvement in direct payments policy and administration.
The LITRG report, “Independent living, direct payments and the tax system”, identifies a number of tax traps and suggests how the system can be made friendlier to the needs of the vulnerable.
You can download the full report from the LITRG website.
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