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Paid childcare

Discuss everything related to paid childcare here, including childminders, nannies, nurseries and au pairs.

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Original poster

Self-employed nanny and tax

20 replies

civilfawlty · 14/10/2015 19:42

Hi all. Seeking some urgent advice.

Our nanny is self-employed. It wasn't our preference, but she insisted, and fulfils the criteria for self-employment.

We pay her for her time, on a monthly cycle. She has been with us for nearly four years. We understood that she was responsible for her tax arrangements, and has an accountant. She has just told us we owe her for the tax she has paid since she started with us.

Clearly there has been a misunderstanding somewhere. She feels she is not earning enough, and out of pocket. We are happy to agree a pay rise going forward, but we just don't have spare cash to effectively refund her for her tax bill since she started, even assuming that is the right thing to do. We love and value her and don't know how to handle. Any advice please?

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Original poster

civilfawlty · 14/10/2015 19:45

Worth adding that we understand she has permission from HMRC to be considered self employed.

OP posts:

Piratespoo · 14/10/2015 19:51

She should only be self employed if she is temporary or has more than one job, and even then not really. Why did you agree to it! You have broken the law by not employing her and if Hmrc get wind of it then you could be fined thousands and thousands. Who has been paying her tax? If she was correctly self employed then she should have been paying her own tax with self assessment. Why on earth does she think you owe it? I think she doesn't know know what she is talking about and unfortunately you haven't educated yourselves either so you are both unclear as to what should happen.

If you want help in sorting out: how does she fulfil the criteria for self employment?
Did you agree and net or gross figure?

FanSpamTastic · 14/10/2015 19:52

Firstly - you cannot have a self employed nanny. What tests do you think she meets so that she can work as self employed? I doubt very much they meet any of the Inland Revenue tests.

can she send a substitute if she doesn't fancy turning up?
can she make a loss in fulfilling her contract with you? eg having given a fixed fee quote for a piece of work that takes longer to do than originally thought.

Nannies are de facto employees - you are in a very vulnerable position if you have not been accounting for PAYE and Employers NICs and could be fined by HMRC.

Do not give her any more cash to cover a tax bill - if she has incorrectly paid tax to HMRC then they would refund it to her and pursue you for the tax that is due. She may not even have paid anything over to HMRC for all you know.

FanSpamTastic · 14/10/2015 19:54

Try reading up on things here

Original poster

civilfawlty · 14/10/2015 19:55

Thanks. She does fulfil those criteria - she has more than one job, and works for a fixed price - and under the law you can be a self employed nanny if you do.we did educate ourselves. She has been paying her tax correctly. I think what she is saying is that she was expecting what she has been earning before tax, to be her post tax income, and wants us to make up the difference.

OP posts:

Snossidge · 14/10/2015 19:56

You understand or you know she has permission to be self employed?

Is she just working ad hoc for you, not set days or times - is she free to turn down work if she is unavailable? Does she invoice you?

If she is genuinely self employed then you don't owe tax. If you have been setting her days and hours, and telling her how to do the work and where, then she is likely to be your employee and you should have been deducting her tax.

Snossidge · 14/10/2015 19:58

What days/hours does she work - and who sets that, her or you?
What does "working for a fixed price" mean? Do you pay her the same regardless of how many hours it takes

DonkeyOaty · 14/10/2015 20:00

I think this is an instance where you could justify engaging an accountant to sort this out. As others say, yes most nannies are employees, they cannot realistically chose their own hours or send another person to perform the task so you might find self in a bit of a pickle with HMRC but tbh I have found the Revenue peeps to be nothing but reasonable and keen to place matters on the correct footing with arrears dealt with in a feasible manner.

DonkeyOaty · 14/10/2015 20:01

Oh sorry x post

No idea then - net/gross pay confusion?

atticusclaw2 · 14/10/2015 20:04

Just say "no" . If she is genuinely self employed then its not your problem if she now realises that she hasn't been charging you enough.

However I would agree with the others saying she's unlikely to be self employed. Have you seen the HMRC clearance letter? (I'm an employment lawyer)

ItsAllGoingToBeFine · 14/10/2015 20:07

I don't understand. She has been with you for 4 years, has presumably invoices you monthly, and 4 years later after 3-4 tax returns suddenly decides this was wrong?

Assuming she is legitimately self-employed this is entirely her problem and not yours, and you are under no obligation to back pay her anything.

I would gently explain this to her although she is seriously taking the piss and suggest a pay rise going forward if you are happy with that.

Lonecatwithkitten · 14/10/2015 20:08

Listed here are the HMRC criteria for being self employed.

Piratespoo · 14/10/2015 20:08

Yes, are you paying her net or gross (in your eyes) and why doesn't she think you should also pay her tax bill. Is she going to pay yours? It's the same thing!

HSMMaCM · 14/10/2015 20:09

If she is self employed (see all disclaimers above), then it is entirely her fault if she has undercharged you and nothing to do with you. I'm assuming she set the rate and not you?

Original poster

civilfawlty · 14/10/2015 20:12

Thanks everyone. Yes, have seen HMRC correspondence. And evidence that she has been paying tax etc.

Advice appreciated!

OP posts:

FanSpamTastic · 14/10/2015 20:14

Well if she is really self employed then all she has to do is revise her charges. It's not up to you to agree what she should charge. Then as a consumer, if she hikes up her prices, you have to decide whether to continue using that supplier or not. It's down to her to set her prices.

Snossidge · 14/10/2015 20:14

If she is self-employed and you are her client, then remind her of that and say you aren't going to be paying any more.

I'm curious as to how she is able to be self-employed though - does she set her own hours every week, can she send a replacement if she is unavailable?

iMatter · 14/10/2015 20:16

Surely if she's self employed she is responsible for her tax from what you pay her?

You don't pay her tax for her. You pay her a gross amount.

She should have asked you for a gross amount. Her screw up.

I did consultancy work for a while and was self employed. I charged clients £X per hour and out of that I paid my tax, overheads etc.

nannynick · 14/10/2015 21:31

She has just told us we owe her for the tax she has paid since she started with us.

No. Simple as that.

Do you have a copy of the terms of business she gave you when she started? Some kind of formal agreement between you which states how much her fees are. You can refer her back to that document and say that her fees are her fees, she set them and you paid them.

She should have given you invoices, so another document on which there are details of her fees.

She is responsible for Income Tax, Class 2 and Class 4 National Insurance on her business profits. You do not determine how much profit her business makes, so how could ever be the person to pay the taxes due on her business.

If she now feels that she needs to be paid more for service she provides, then she can increase her fees by giving the agreed notice of fee increases in her business terms. You can then decide to still hire her service or not.

She has been doing this for nearly 4 years, so this is not the first time she has completed a tax return. Her next payment is due in January, the same as it was in Jan 2015 and Jan 2014. So paying the taxes due is not coming as a shock to her. So I wonder why she is asking now?

Blondeshavemorefun · 14/10/2015 22:22

Not sure how she can be a se nanny If she has worked for you for 4yrs

Sounds a like she has set hours /days /weeks and that's employment

Think you have been doing a tax fiddle by avoiding employers ni and all the things that go with employment - ie holiday smp sick pay etc

Did you sign a contract that she gave you?

I'm se as a temp /night nanny and I go from job to job

I state my terms and conditions

How much do you pay her gross?

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