Questions regarding petrol/mileage allowance for nannies

[goingbacktowork]

I have read that what might be "expected " is 40p per mile for petroel cost/depreciation etc. I have a couple of questions about this.

Is this just convention - i.e. the norm rather then what has to happen? Is this amount something that is normally negotiated as part of a contract? I am looking foe nanny to use own car but 40p a mile is going to work out v expensive for me so was wondering if this might be open to negotiation.

Also on the basis that I pay nanny tax and NI is this amount treated seperately as it is supposed to be an expense? It does n't make much sense for anyone to be paying tax on this if it is just a repayment for costs so how is it treated for tax purposes?

Thanks

no you dont pay tax and NI on the petrol money

most nannys go by the 40p rate as that is what rac/aa etc reconmend , it covers the petrol but also the wear and tear of cars/tyres/goes towards costs of servicing/mot etc

also the milage on a nannys car can go up hugely if using it for work so when comes to sell has a jigh milage for a car of that year

a lot of the journeys are short and use up more petrol then long trips

yes some nannys may negotiate but many wont as they feel that 40p is the going rate, ie not just a figure they plucked from nowhere iyswim

but my motto is ,if you dont ask, you dont get

Thanks - I understand all this rationale.

So let's say for arguments sake she does 100 miles (£40) would I just pay her £40 seperately i.e. not taxed etc . Do I account for it as I pay her tax or is this effectively excluded from returns?

First 10,000 miles each year is tax free. After that it is taxed.

The figues are put on form P11D so see guides to completing P11D for further information.

You don't pay Nanny Tax and NI as such.

As employer you pay Employers NI. You deduct nannies Tax and NI and transfer that amount each quarter to HMRC on the nannies behalf. The money is from the nannies gross pay, so is the nannies money. It's just that they never get it in their hand. Does that make sense. I know it seems different as you are paying all the money, hard to get in your mind that some of that money is the nannies.

So your costs as employer (in terms of things you put on the HMRC paperwork) are the nannies Gross salary plus Employers NI. Then any additions - such as mileage, first 10000 miles of which is tax free.

You can negotiate a lower price per mile, though if nanny agrees or not is another matter.

So you can complete the return and pay your nanny, plus also track mileage should you need to request that it's reduced, get your nanny to log all work mileage being claimed.

I keep a spreadsheet detailing my mileage and send monthly segments of it to my boss as a mileage claim. I think my boss then tracks that on a miles per month basis, for completing the P11D.

Just done a Google and there is a form: P11D WS6
Sorry can't link as in mobile mode, perhaps someone else will post the link.
Looks to me as though that is a way of reporting the mileage.

A couple of things to add to NN's comments:

I think you will find that many nanny employers do not in practice submit P11D forms.

It is not true that any payments for mileage over 10,000 miles are taxable, the true situation is that up to 40p per mile can be paid for the first 10,000 miles in each tax year (with each employer) and for any further miles up to 25p can be paid in each case without the payments being taxable.

You only submit a P11D for employees paid more than £8,500 a year which may not be the case for a part-time nanny. Expenses payments made to employees paid less than that are reported on form P9D, but business mileage payments within the approved rate do not need to be reported on form P9D.

Note that once you have reported mileage payments (and any other expense payments) on a P11D or P9D the nanny may need to submit a tax return, or write to HMRC to state that the whole amount of the payments are allowable business expenses. Otherwist HMRC may amend the nanny's tax code to collect tax on these payments (you can see how the problem currently in the news has come about).

Form P11D WS6 is not for reporting mileage payments (they are reported on P11D or P9D). P11D WS6 is an optional form which sets out the calculations for the taxable benefit where payments of more than the approved amounts (40p first 10,000 miles then 25p) are made.

Sorry to be so pedantic but unfortunately these HMRC procedures (and the underlying legislation) are quite specific and (unnecessarily) complicated.

To summarise all of that, there is no tax or NI due on payments for business mileage within the approved rates.

HMRC do require employers to report these payments (on form P11D) and if an employee completes a tax return they must show the payment as a receipt and claim it as an expense in the employment section of their tax return so that there is no effect on the amount of tax due.

I would never recommend that an employer does not comply fully with their reporting obligations but as I say, I think you will find that many nanny employers do not in practice submit P11D forms; there is no loss of tax revenue, just a saving of costly administration for employer, employee and HMRC.

Always nice when an accountant posts on these threads. Thanks for clarifying things MrA.

Given that many nanny employers use a payroll company, would the payroll company be asking about mileage payments?

If you use a payroll agency you need to tell them about mileage and any other expenses payments so they can file a P11D (or P9D) electronically at the end of the year (and give the nanny a copy) if they provide this service (I can see that some do, at least one doesn't and others are not clear).