Help with a friend looking after our child

[thepuddingpie]

Hi,

I wonder if anyone can help, I am going back to work soon and my job work pattern will be 2 weeks on 2 weeks off, in the 2 weeks on I have a friend who will be looking after my daughter (in my home) and she will be bringing her own daughter along with her, my work will be shifts meaning I will probably need her help 4-6 days during my 2 weeks on. My friend previously nannied and worked in a nursery so I understand to get childcare vouchers etc she will need to be ofsted registered. Is there anything else I need to do? We have agreed that she will be self employed and she will be under the tax and national insurance threshold as I think her monthly earnings will be around £400.
Has anyone else been in a similar situation before? Do I need any extra insurance even though she is self employed? Any help/advice would be greatly received as its all so new to me.
Thanks :)

She cannot be self employed as you are dictating when she works and where she works. You will need to run payroll.

she cant be self employed as you dictate the days/hours and it is a perm position

lol cross posted, great minds :)

You'll have to employ her as a nanny and arrange her tax and ni if needs be

Ok thanks, even if we have agreed it will be ad hoc? I have said it will be on average 4 to 6 days a month but may be less e.g I will be working over Christmas and my husband will be off to look after our child so my friend will not be needed etc
Also if I pay her roughly £400 a month (we have agreed on a hourly rate not a set salary) will she still be liable for tax and national insurance?
Thanks very much :)

It seems a fairly regular childcare and permenent so highly unlikely she can be self employed. Remember ... if you get this wrong and HMRC finds out you will be liable for fine and backdating all NI and tax ... not her.
Tax and national insurance will depend on if she has any other income. I think in your situation it's best you use a payroll company to do it for you ... I think the cost is under £200 for a whole year so well worth to avoid the hassle.

If she has any other income from anywhere then she may well have income tax payable. National insurance I think is done on a per job basis, HMRC website will have the threshold figures.

Ad-hoc if she has the choice to say NO she won't come x day but can come y day instead, may mean HMRC are more willing to accept it as self employment. You are best speaking to the employment status team at HMRC to get their view on your proposed arrangements. Whose idea was it that she would be self employed? If it's her idea and she would be setting up a business providing that service to multiple clients, then again that may help convince HMRC it is true self employment.

Paying below the threshold does not mean the person is self employed. They can be an employee but due to the pay you do not need to register with HMRC as an employer. You may not need to register as an employer as long as you pay below the monthly threshold AND the person has no other income. It seems to depend quite a lot on what other income someone has... Would this be their only work? Do they get any benefits and if so are any of those considered as income (not sure how the benefits system works)?

Why do you want them to be self employed? Is it because you don't want to give them employee rights like statutory holiday entitlement?

Assuming you are in England, to be part paid in childcare vouchers she will need to be Ofsted registered. Does she meet the criteria for that? Having worked in a nursery she may have a suitable qualification, though do check. She will need updated paediatric first aid, she will need nanny insurance.

Without a contract of employment she may not be able to get the nanny insurance. It's a catch 22 situation, the nanny insurance companies have sussed I think that sometimes nannies wish to be self employed and the insurance underwriters don't like that, so won't cover the risk.

If she is really self employed, then she will need to find an insurer who would give insurance cover... anyone know of any who don't require that a contract of employment is in place?

She doesn't get any kind of benefits and won't be working for anyone else, she is purely doing it to help us out and we obviously want to do it properly.
We thought being self employed would be the easiest option as she is a friend and if she needs to take leave etc she will take it when she has 2 weeks off if not my work is flexible with taking leave etc
Thanks for all the info though.

If she is employed then national insurance is due on earnings over £149 per week. It doesn't matter if she has only earnt £400 in one month - if she has earnt £180 in week one and £220 in week 2 and nothing in week 3 and 4 she will still have to pay ni in week 1 and 2.

I would think there is almost zero chance Hmrc would consider this arrangement self employment as too much control resides with you- picking a bit of holiday doesn't balance this.

You could register to do payroll yourself if follow Hmrc guidance but I would recommend payroll agency as saves a lot of hassle.

Bear in mind it can take time to register with ofsted (assuming your mate has all conditions) and then sort out registering to pay in vouchers with agency who give you them. So bear in mind you may have a time when you can't use vouchers to pay while you wait on admin.

I think there is a monthly threshold for NI that can be used instead of the weekly one. Gut feeling MrA mentioned it sometime ago when I said a similar thing about the weekly threshold. Will try to look it up.

Cindy has a point regarding insurance, another thing to check.

Your friend will have quite a lot of cost to do this, Ofsted Reg, DBS check, DBS update service, nanny insurance, first aid course (if their last one was 3+ years ago or unsuitable for registration). That could amount to several hundred pounds before they see a penny in wages.

If legally they could be self employed, is it morally right? Do you feel it is reasonable to deprive your friend from statutory employment rights?

If you started from the view that they were your employee, that you were offering a job, then I feel that would be better morally though it may cost a bit more.

They are your friend but if things go wrong would the friendship last?

Insurance:
nanny means a person contracted and paid to look after children, working in and from the child's home

Sterling/DAS policy, in the definitions and interpretation section. So I would say that it needs to be checked with the insurer. They have similar definition for doula and maternity nurse so "person contracted" may not mean working under a contract of service (employee).

In Aug 2012 in a thread titled "Sanity Check: au pairs in the home counties" (sorry on mobile so can't link easily) MrAnchovy mentioned that if paid monthly PAYE had to be operated if paid £464 or more in any month.
HMRC says Class 1 NICs LEL threshold is £109 a week, £473 per month, £5668 per year.
So I think if you pay less than £473 per month, then you do not need to register as an employer.

Try calling a nanny payroll company and talking to them

I would have thought a payroll company would give you some free advice in the hope you then use them once salary does exceed the lower earnings limit.

Should say the £473 figure is 2013/14 tax year where as figure from MrA was from 2012/13 tax year.

As this is a friend, would it not be easier if you simply swapped childcare, rather than involving money?

They care for your daughter and in return you care for their daughter. They could then have some child free time to get things done.

If your friend insists on being paid, then get professional tax advice from people experienced in dealing with this sort of thing. I would suggest contacting the nanny payroll companies and seeing what you can get out of them for free... for example ask one about if you need to register as an employer even though you would be paying less than £400 a month. Ask another about employment rights in the situation when you are paying under the monthly NICs lower earnings limit.

I am a nanny, I can't give tax advise and I doubt anyone else on here can. We can just point you towards information. So do consult a professional about tax and employment matters.

Some links:
HMRC: Register as Employer
Class 1 NICs threshold and PAYE tax threshold
TaxNanny - Payroll from £99 (first year)
PAYEforNannies - Payroll from £125 a year

Thanks nannynick, that's really helpful. I have agreed to pay her so I will consult a nanny tax company and see what they suggest.
Kind Regards

Sorry it's all so longwinded and confusing. Alas taxation and employment rights matters often are. I hope the nanny payroll companies can assist you.

Nick and of course a lot of others on here, I applaud you, a font of information as usual
xx