Can you pay a nanny through their limited company?

[OctoberOctober]

We are looking to use an after school nanny and she has suggested paying her through her husbands existing limited company rather than through PAYE. This would presumably save her PAYE as they would take the income as dividends.

I did a similar thing myself a couple of years ago (different field), so understand the limited co set up but I have never heard of anyone using it within childcare which makes me wonder if it is 'legit'. I am wondering if there is anything around us being classed as an employer that makes it unworkable.

The nanny already has an income through this company so her income from us would be taxable, although below NI limits.There isn't really any benefit to us doing it this way but wanted to investigate if it helps her take home more pay.

Has anyone any experience of this? Thanks

Ring the HMRC

I would wonder if it breached the IR35 rules.

Paying via a company saves your Employers NI, so tax office may view you to be in the wrong if you were to do this. Contact HMRC for advice, IR35 Helpline - I think that helpline is aimed at the person providing the service but I would hope that they could give you some indication as to if they feel the situation you describe would fall under IR35 rules.

If it does fall under IR35, the nanny will be no better off by using a limited company, so I am not sure why they would want to do so.

I wondered about IR35 too NannyNick. I will call HMRC on Monday.

I doubt the nanny has heard of IR35 or the implications, she had no clue as to what she was being paid through company as her husband runs it.

I think we will be paying the same either way having agreed a gross salary, but I can understand why she would prefer this method of payment if possible

If you engage the services of a limited company you are their client. So your amount of control is different, isn't it? Could you tell them what to do, when to do it?

If you employ the nanny directly you are the employer. You dictate the terms of the employment, you can tell them what to do, when to do it, how to do it.

The cost is not the same either way, as if you are paying the limited company, you are paying a fee that they have decided. Their fee could include cover for all costs involved, such as activities, mileage. They would need to factor in not being paid for times they do not work, such as when they or you take holiday.

If you employ the nanny, you determine the Gross salary and you pay Employers NI (to HMRC) on top of that Gross salary. You would pay for activities, mileage and you have to provide Paid Holiday (12.07% of working time).

In terms of control, I would expect to be deciding what and when they work, presumably as anyone would with a nanny? guess that points to employer.

Good point about holidays, and also just thought that they would probably charge VAT as ltd co which would significantly push up costs. As it is just after school care for 3 days at less than £111pw then we wouldn't be paying employers NI anyway.

There won't really be activities or mileage but I would expect to reimburse either way.

The VAT could be the decider, pretty sure the company would be VAT registered as it is their main business.

Yes due to it only being after school and 3 days, Employers NI could well be zero, assuming it is term time only.

No idea about VAT, it gets complicated. Childcare by a registered provider is not vatable (I think) but their main business may not be childcare, so I guess you are right to wonder if their main business would charge VAT.

If you can use them via a limited company, then you save yourself doing payroll admin (a nanny payroll company can be £130+ a year, though you can do it yourself).

Maybe this is more an Employment Status question... are they able to be a contractor providing you with a service given that you need specific hours on specific days. My gut feeling is that they would be your Employee.

HMRC Status Team contact details - maybe call them on Monday.