Hey, don't thinkit isn't done, Xena. I don't believe for a second that all the mumsnetter who claim to be towing the line are either 1- representative of the general nanny employer population or 2- telling the truth.
So, you would just use the same payroll company as your business, but pay her from your personal banl account, and list yourself (not the company) as your employer? If so, that's legal. What nannyk is doing is probably not legal... but I won't tell.