Can after school nanny be self employed?

EconomicsGirl

We're getting an after school nanny. Her husband has suggested they invoice us as if it was a business and they'll pay the tax. Everything I've read online suggests this isn't possible and nannies are employed and we are liable for the tax. Anyone know is there anyway such an arrangement would be allowed? Not sure why its banned as tax would be being paid and everyone is happy but it seems to be banned, would make life much easier if it was allowed as they'ld do all the tax forms. She has another job (employed) if it makes any difference. Thanks for any help.

mountainofdebt

Worse case scenario is that she will consider it to be a cash in hand job and that the tax man never actually sees the tax / ni due - which would make even more worth while if she is using her tax allowance in another employment as any income she earns from you would have to be taxed (and potentially attract ni as well) at basic rate

Uncertain

EconomicsGirl wrote: »

We're getting an after school nanny. Her husband has suggested they invoice us as if it was a business and they'll pay the tax. Everything I've read online suggests this isn't possible and nannies are employed and we are liable for the tax. Anyone know is there anyway such an arrangement would be allowed? Not sure why its banned as tax would be being paid and everyone is happy but it seems to be banned, would make life much easier if it was allowed as they'ld do all the tax forms. She has another job (employed) if it makes any difference. Thanks for any help.

It depends on a whole number of factors. It hinges on whether she really is a business (even a part time one) or is actually an employee in everything but name.

For example, if you were one of a number of clients this ticks a box on the business side. Could she send an alternative person if she was sick or on holiday? Not so relevant to this "job" but who is responsible for paying for time and materials to correct any mistakes. etc etc

There is an interactive guide (completely anonymous) on the HMRC website to help you establish if a particular situation is employee or self employed.

ultrarunner

There are a number of bureaux which can do tax for nannies

vintner55

A few years ago I had many discussions with HMRC about this. They gave the example of a Vet with his own practice who had a contract to look after the animals at a wildlife park. He decided from his expertise what vaccinations/preventative treatments were needed and when and when routine check ups should be undertaken. He scheduled the work and decided whether he needed to do it himself or if a junior vet or technician could do it.
This was deemed to be correctly classed as self employed.
He was also called in for ad-hoc situations, emergencies. For these cases it was deemed that he was an employee and liable for tax and NI. The reasoning was that he was required to attend in person and within a certain timeframe and he was told what action was required.
If from this and from your research you believe she is an employee you must treat her as such and tax her correctly otherwise HMRC will pursue you for the outstanding tax and NI, plus interest. I have even had them say that we would be liable in such a case even if the individual had declared the income and paid the tax on it. Don't know if that's actually true but if I were you I wouldn't take the chance.

Uncertain

There are two other ways round this.....

If the nanny really wants to be self employed she could become a limited company (Mary Poppins Ltd !!) then invoice for her services. As far as I know this is 100% watertight.

A compromise is if she registers for VAT (you can register voluntarily below the compulsory turnover figure). Normally this means that she would be regarded as a "proper" business for tax purposes and thus protect the client (i.e employer).

The problem is I suspect she would see both as too much hassle.

LittleVoice

Uncertain wrote: »

A compromise is if she registers for VAT (you can register voluntarily below the compulsory turnover figure). Normally this means that she would be regarded as a "proper" business for tax purposes and thus protect the client (i.e employer).

By registering her business for VAT, she would then have to add VAT to her charges. So, without increasing what the client family pay, she would have to reduce her nett income to 80% of what she is charging - and still be liable for tax on the profit.

LittleVoice

vintner55 wrote: »

I have even had them say that we would be liable in such a case even if the individual had declared the income and paid the tax on it. Don't know if that's actually true but if I were you I wouldn't take the chance.

It is indeed true. The individual is regarded as having received a nett amount from the employer and is therefore due a refund from HMRC of the tax they have incorrectly paid themselves.

skibadee

Im presumming this person has a valid CRB, also, if you are wishing to use any of the childcare element of tax credits she will need to be ofsted registered.

LittleVoice

skibadee wrote: »

Im presumming this person has a valid CRB, also, if you are wishing to use any of the childcare element of tax credits she will need to be ofsted registered.

What do you mean by "valid"?

EconomicsGirl

Thanks for the replies - very helpful. She works part-time at my old children's nursery who are OK with her doing this so I know she has a valid CRB and childcare qualifications and she knows my kids. Her husband has an accountant and has offered to do things himself. This would be perfect for me but obviously if HMRC don't accept the arrangement we're liable for tax on everything (even tax on the tax it seems) with no right of reclaim so I want to be 100% certain its allowed. Obviously I'll phone HMRC to make sure but it looks like nannies generally are classed as employed (unless ad hoc days) so the straight self-employed route is unlikely to be an option. I think her husband was talking about making a business but non-vatable (otherwise it adds 20% to the costs and there's already around 42% tax with employers NI/NI and tax) but am checking this. We would not qualify for any tax credits and I know I can't use childcare vouchers unless she becomes Ofsted registered. We would be the only client but she would be able to send someone else in from the nursery if off sick or on holiday. Thanks for the help.