do i need to set up business

[headlongautumn]

Hi folks

I pay a friend to collect my daughter 2 afternoons a week after school and keep her for 1 hour. It is an informal flexible arrangement which works great for all of us. She gets £50 for the 4 hours a week.

She moved to this country about 4 years ago with her partner with his work and has recently been granted "pre-settled status". she has never claimed any benefits etc and has been really looking for work but hasn't been able to get any yet.

She would like me to now formally "employ" her to show evidence of employment for her application in the future for settled status. The amount I pay her is far below national insurance and tax.

I have tried to look into how to do this and I am totally confused. I think I have to register as a business, get an accountant, do tax returns, register on a pension scheme etc.

I am feeling a bit overwhelmed by it all - does anyone have any advice??

She can do a self- assessment and be recognised as self employed. I would not set up a business for what you've outlined.

As PP says, she could invoice you and it's up to her to sort out being a business. That would free her up to take on other clients.

Bear in mind she must register with OFSTED if she wants to care for under 8s more than two hours per day.

Alternatively you could research nanny contracts (as that's essentially what you mean in your OP albeit part-time). Then you'd need to consider pension, NI, sick pay, holidays, maternity leave. This would give you exclusive use of her time (for her employed hours).

Can she legally be self employed for the task in question though? It would certainly be simpler for the OP but you can't simply choose to be self employed because it is more convenient for a particular party.

HMRC has rules which are used to decide whether a relationship is one of engaging a self employed contractor, or employing a person.

www.gov.uk/employment-status/selfemployed-contractor

If it ends up that you are employing your friend, you probably won't need an accountant, but you might be required to offer her a workplace pension, but she could always agree to opt out as it doesn't seem worth bothering about for such a small amount.

This seems to be an informal nanny arrangement, so any advice on employing nannies would probably be useful, eg

nannypaye.co.uk/can-a-nanny-be-self-employed

Which seems to say that either you have to employ her for the role, or she needs to be a registered childminder, so you're caught by paperwork either way.

Thanks so much for all this advice and we plan to sit and go over options at the weekend.

Really appreciate your inputs.

You don't have to go through an agency - I registered as an employer with HMRC for our nanny. It was a bit of a faff to set up but worth it as the nanny agencies charge a lot (Nanny tax etc) and once you're up and running it's fine. HMRC talk you through it and are quite helpful.

They recommend payroll software - I used Payroo which until this yr was free but now they charge 6.00 a month. Really easy to use - just put in the no of hours and they work out the tax (she will need a tax code first). You won't need to worry about pensions if she is only earning £50/wk. But if she ups her hrs that is actually not a massive stress either. So don't worry! And don't get enticed by the companies offering to do it for you for megabucks. I promise doing it yourself is much easier than it sounds