Income Tax (Trading and Other Income) Act 2005 section 744

Payments to adopters, etc: England and Wales

Section 744 provides an income tax exemption for certain financial support payments received by adoptive families, special guardians, and persons with whom a child is to live under a child arrangements order in England and Wales, subject to restrictions where payments are made to or involve an excluded relative.

• A wide range of payments connected with adoption are exempt from income tax, including court-authorised payments to adopters, adoption agency payments for legal or medical expenses, adoption allowances, and financial support provided as part of adoption support services
• Payments to special guardians, persons named in child arrangements orders, local authority contributions to a child's maintenance, and payments under the Social Services and Well-being (Wales) Act 2014 for children's care and support needs are also exempt
• The exemption does not apply where the payment is made to an excluded relative of the child, or where an excluded relative is also appointed as a special guardian or is named in the same child arrangements order and lives in the same household as the recipient
• An excluded relative means a parent of the child, or a person who is or has been the spouse or civil partner of a parent of the child