Nanny offering to work for no tax

[jennifern]

Does anyone have any experience with a nanny offering to work without having taxes paid? Other than the obvious tax avoidance, what are the down sides?

She is willing to sign a contract.

if found out you will be fined £3000... + all tax from the £ you have paid her

U are the one in the wrong, not her. shes unproffesional though, and i dont know ANY nannieswho would do it!

Thanks for all of the advice. It is all so confusing as all of the childminders in my area are either full or hopefull and it is all just so expensive.

Thanks again.

Agree with the others - It's not something she can choose! And it's not her who will end up fined by the IR

After slapping myself on the hand a couple of times, I got to thinking. Isn't there a such thing as an independent contract nanny? There are loads of jobs where a contractor hourly rate is paid and it is up to the contractor to pay their own tax.

its illegal for a nanny to be self employed... probably because it gets empolyers of of paying employers NI contributions. which again is a legal part of having a nanny!

i think the reason is ebcause the parenst are the nannys boss... we do what our bosses tell us... we dont waltz ina dn say we are looking after you children and we will do it this way.... we meet your requests, equaly we cant go home when we want, we have to wait for a responsible adult to be home whoch is sort of out of our control!

Interesting, but very strange since contractors also have bosses.

Again, thanks all for your advice.

I don't think a nanny would qualify as self-employed unless he/she worked for more than one client at a time.

As for not being independant I assumed it was because the wages are fairly low in comparision to other contractor type jobs and having all the hassle of paying another 11% tax on earnings (emprs NI) and doing all your own PAYE etc would put most people off!

I have always thought it odd though that nannys wages are advertised net. Are there other occupations that do this?

There's a lot of info on the nannyjob talk boards about this.
I seem to remember that the IR criteria for self-employed include - being able to choose your own hours, and being able to sub-contract the job to someone else...nannies can't do either of these things.
If you search for nannynick's posts on this subject he has a link to a copy of a letter from the IR which states that nannies cannot be self-employed. Maternity nurses (very short-term contracts I guess) can be though!?!

As far as I know a nanny can be self employed it has to state in her contract that she will pay her own Tax and NI. There was a tax loophole a few years ago which made it very beneficial for a nanny to be self employed but this loophole has now been shut. If a nanny is requesting to be paid without tax I would be very dubious of her. I have been a nanny for 12 yrs and always paid tax. I know it is a cheaper childcare option. Have you thought about nanny sharing?

You could try putting such a clause in the contract, but if it is found that in fact for tax purposes she is employed rather than self-employed then I believe that this clause is not legally enforcable - the employer will still be liable to have made the necessary deductions.

It is possible for certain nanny positions to be self-employed but it is rare.

I have to say that there are a number of nannies and parents who operate on a less than legal basis. You are obviously risking both fines and having to declare an offence if you go down this route, but you wouldn't be alone. Obviously a lack of NI payments gives the nanny an ongoing problem re benefits/pension, so you need to consider that if you go down the illegal route that this is something that could still come back on you many years from now.

The reason nannies can't be self employed is because Gordon Brown wants your tax money. As much as I agree that this is outrageous, it is what it is. If you hire a person to come to your home to look after your kids on a regular basis I'm afraid that makes him/her your employee.

I don't know how old your kids are and therefore if this suggestion would be appropriate, but you could reduce the tax burden by hiring an au pair / childminder / nursery combination. Though if you have very young children this is not really a good idea and if you have several children it is probably not cheaper.

julie woolie as of april 2 years ago it is illegal for a nanny to be self employed...

about the only exception (and there are debates even here) is with maternity nurses who only stay in a job for a matter of weeks.

Sorry NannyL, but that is too general a statement. I haven't seen any statement of law that reflects that (in fact it is hard enough to find where the role of a nanny is even defined in UK law).

It is far more difficult for a normal nanny contract to be a contract for services rather than a contract for employment, and therefore at least 99% of contract will be for employment. But it is possible to have a self-employed nanny - I have had one, and HMRC agrees!

Sorry but you do have to employ a nanny.

It is a legal requirement in the uk...

there are LOADS of links
If you employ a nanny in the UK and you pay her more than £100 per week (tax year 2007/2008) you have the same legal responsibilities as a commercial employer

Aren't nannies self-employed? No, nannies don't meet the Inland Revenue criteria for self-employment status. The childcarers that do are maternity nurses and childminders who are responsible for their own tax and NI contributions.

governemnet site which shows criteria that you have to fulfill to be self employed.... which nannies DONT fulfill!
clearly if you have a nanny which comes when she likes, if it suits HER, not you, then maybe she might be employed... ut i cant imagine many parenst appreciaiting being dictated to BY their nanny about when (S)HE comes to work!

Ladymuck, if you seriously have a self-employed nanny and it is approved by IR, can you please post exactly how this works as there are lots of us who would be interested in knowing!

Ladymuck I am wondering under what circumstances HMRC agreed that your nanny (at that time) could be self-employed. Also, did HRMC agree that verbally, or in writing?

I am of mixed opinion on this, as other than a letter to a nanny agency I have not seen evidence from HMRC stating categorically that a nanny can not be self employed, or indeed that a nanny must be an employee. As far as I can see HMRC would access each case on it's own merits - and if a nanny did manage to meet the criteria for being self employed, then it would be possible.

However, the vast majority of childcare providers working in the child's own home, would not meet the criteria. But that does not mean than on a rare occasion someone would meet it.

And again, with greatest respect, I beg to differ. The first two sites that you link two are trying to sell payroll services (so of course they're not going to help you set up a self-employed structure!).

The HMRC site does give some indication of the various items considered when looking at employment v self-employment. I would totally agree if you had said that having a nanny working for your family solely for a 60 hour week in your home under your terms can be nothing other than a contract of employment.

However there are many other ways of structuring a contract for nanny services, especially if you are only looking for part-time and flexible cover. These won't suit everyone, and probably wouldn't suit the OP, but they can exist such that a nanny is not an employee and it is not illegal.

Yes, I am one mother who was happy to have a nanny who wouldn't (and didn't) agree with every request that I made in terms of hours, and who could send a (pre-approved, qualified and known to the children) alternate. And this arrangement worked very well for us for 2 years and was discussed with the tax office. The nannies (who worked together effectively) worked for a number of families (most of whom are friends of ours). There are of course increased risks to both sides - the parents may not get the nanny they want on the day they want, and likewise the nanny may not have work on every day. But of course this is one of the risks of self-employment! But given that most of the parents involved were self-employed and could themselves be flexible this arrangement worked very well. In fact it continues today though I don't tend to be part of the arrangement.

So once again, whilst the majority of nannies are employees, it is legal for a nanny to be self-employed. It is just rare that the circumstances allow her to be. And I would point out that the above arrangement came about as a significant number of us needed a nanny (and preferably the same one, or possibly one of two) for irregular numbers of days. We weren't trying to avoid tax or NI, and I'm not sure that this arrangement was particularly cheaper on an hourly basis say.

I don't think the Revenue are likely to say a nanny can never, ever be self employed, just as they wouldn't say any other occupation could never be self-employed. Because you always have to allow for individual circumstances. However, it's very unlikely a nanny would qualify for self-employed status due to some of the issues mentioned about sub-contracting and setting own hours (and using own equipment at own business premises, etc. etc.).

Thinking about it, I can not locate any information from government which states that a maternity nurse is self employed. Again, to me they don't meet the criteria. Yet most agencies seem to feel that a maternity nurse is not an employee.

Should it be helpful to anyone, you can find some parts (possibly all) of the Employment Status Manual at: HMRC: ESM Manual

That I feel is used by Status Officers to determine employment status for each individual job.

I agree with Ladymuck that links to sites providing payroll services are not good sources of information... while being a good guide, they are not an official source... personally I am only interested in official information from government websites, in particular HMRC.gov.uk

If we are being strict the ESM guide is helpful because it is the HMRC's internal guidance to its staff on how to conduct cases. It isn't actually the law, but the HMRC's interpretation of the law (much of which consists of case precedent).

Very true, ESM is an interpretation of the law by HMRC. It is not the law itself and thus can be challenged in a court.

I am of the view that in Ladymuck's specific case, that it appears that the nannies involved were under a contract for services (self-employment), not contract of service (employee).

My reasons for this are:

• nanny who wouldn't (and didn't) agree with every request made in terms of hours,
• who could send a (pre-approved, qualified and known to the children) alternate.
• nannies worked for a number of families
• parents may not get the nanny they want on the day they want
• the nanny may not have work on every day

Clearly the individual contracts would need to be considered, but from information supplied the relationship is not typical of a Parent / Nanny relationship, where the parent is Master and the Nanny is servant.

Just my view of course... off to study the ESM.

I liked this little snippet from ESM
Source
"It must be emphasised that status in not a matter to be determined by running down some form of check list or adding up the number of factors pointing toward employment and comparing that result with the number pointing toward self employment. It is a matter of evaluating the overall picture that emerges from a detailed review of all the facts."

In the past, the right of control has been seen as a good indicator of status, but these days that is no longer the case. Therefore just because a parent has control of what their nanny does, it does not automatically mean that the nanny is an employee.

Oh what a fun and confusing subject.