Tax on surrogacy payments

Child Benefit » February 10, 2020

tax on surrogacy payments

A recent consultation on reforming surrogacy law has prompted some discussion regarding the tax implications of payments to surrogates.

Any round sum allowances received by the surrogate in excess of expenses incurred ‘wholly and exclusively’ are likely to be taxable as miscellaneous income.

Whilst there have never been any cases of HMRC seeking to tax surrogacy payments the fact that the current consultation considers changing the law relating to payments is likely to generate some interest in their tax treatment from HMRC.

Other key issues include:

  • How will a payment impact a surrogates right to child benefit (if they have their own children)?
  • Would a payment towards the childcare costs of the surrogate impact their claim for child tax credits/universal credit?

Not only is tax on sums in excess of genuine expenses at stake, but the surrogate also risks penalties for failure to notify HMRC of a tax liability, and the associated compliance implications.

Read the full consultation response submitted by the Low-Income Tax Reform Group.

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