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.

I employ people for an hour after school each day to work as ABA therapists with my eldest son ( and occasional Saturdays). I also employ mother's help type people during school holiday. Most of these are employees, but one works for several families and is therefore self employed. She does set her own hours (tells me when she is available, I choose from those days). The money comes from social services, and I explained to her that they might want to see proof that she was declaring tax, so far so good.

I would imagine a nanny providing ad hoc childcare, or working with several families could quite easily declare themselves to be self employed.

Getting on with my ESM reading, and I now feel that part of what I wrote earlier is wrong.
---
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 ---

The part about sending an alternate worker, is invalid, as the parent could pre-approve that person. See ESM1052 where it talks about Narich Pty Ltd v Commissioner of Pay-Roll Tax.

Anyone else agree with that (especially those of you who deal with this sort of thing a lot). Have I interpreted this correctly?

With regard to care in the home (nannies), most factors which can be considered for determining employment status seem to be of little relevance. While in themselves they give a pointer in one way or other, they are only little pointers.

The big pointers seem to be the following:
Could the engager [parent] exercise control over what the worker [nanny] does?
Could the engager [parent] exercise control over when the work is done?

As a nanny I feel that I can choose for myself what I do, and in practice I do choose what I do, but it remains the fact that my employer could tell me what to do.
Also, my start time is set by my employer. They are indeed telling me when the work is to be done.

If as a parent you do not have any control over what the nanny does, or when they do it, then the nanny may (if other factors conclude a similar result) be self-employed. However, in reality I doubt there are many situations in which a parent would not be able to dictate what the nanny does, or when they the nanny does it.

Clearly I am not a lawyer, so the above is purely based on how I am interpreting the ESM.

The Narich Pty Case is not a UK one though, and therefore does not constitute law in the UK. The reason that it is quoted in the ESM is that these or very similar facts have not ever been presented to a UK court and therefore there is no case precedent here (other than Express and Echo, which effectively cites the opposite), but sometimes countries which have tax law derived from the UK law (so includes Ireland, Aus, NZ) will have had cases presented which may give some indication as to how a similar case might be decided in the UK in the event it was appealed.

Good points - nannynick/ladymuck

Its also worth considerig jenni that this is also a particular area that HMRC are focussing on at the moment so it could be tricky to try and argue something that is at best hopeful at a time when HMRC are really going in heavy on self employed status .

Fron the pint of view of someone who works in the office of a contracot in the consturction industry, the IR are really clamping down on who can be classed as self employed in this field too.

When we subcontract out to a builer we provide a quote for the job. This is the price we are paid and as a subcontractor we bear the penalty for any financial loss if the work takes longer than expected etc. All expenses are factored into our quote.

We are free to send any qualified tradesman to site and to to the work during whatever hours we wish within the operating hours of the site. So if we want to knock off at 2.00pm one day we can as long as the work is done.

Subcontractors who are told where to go, what hours to do and who are paid hourly with no risk of financial loss if the job goes wrong are now classed as employees.

Sadly then it seems that for most of us who need the same nanny to turn up at the same time each day and work the same(ish) number of hours each week, the employee route is still the only way to go!

don;t forget that whilst they may be circumstances in which you can use a self-employed nanny it's unlikely to save you much in the way of money - whether they're self employed or employed by you they're going to want approximately the same net earning. it's not that relevant whether you pay the tax direct to IR or you pay the nanny enouugh so that she can

so....
what is the point of the new childminder thingy that registers the childminder to work in the child's own home?
isn't that a sort of self-employed nanny?

Haven't heard about new rules for childminders, and can't see anything on the NCMA site - do you have any more information or a link? How does it work (as cms usually look after more than one child at a time?)

Hatwoman - I don't think that I did particularly save any money in terms of a gross hourly rate, though I didn't have to worry about Employers NIC, nor the need for payslips, and making payment to the Revenue. The arrangement I described was set up because both the parents and the nannies wanted flexible arrangements. It was only when we came to look at the question as to whether we were employers that we realised that we weren't. The arrangement did give me consistent in-home care for my children from people I had selected and trusted, and to any outsider who wasn't keeping track of which days my nanny appeared I guess it would have looked like a standard employee/employer arrangement. But it does show that a nanny can be legally self-employed. FWIW the nannies were older and fairly experienced, but also financially stable so that they were happy to have the risk of no work on a particular day, and also wanted to be able to decline work if a better opportunity came along. Younger nannies aren't always in that position.

OCR Voluntary which replaces the Childcare Approval Scheme, which in its turn had replaced the Home Childcarer Scheme (are you getting confused yet?), to my knowledge is no different to employing a nanny.

onthefence - is this the scheme you mean? It registers a nanny or childminder to care for a child in the child's own home, but to my knowledge it does not change the tax situation regarding employment status. A childminder caring for just one family, in that families home, on a regular basis, would in my view at least probably be unlikely to be self-employed.

LM - I was just thinking that some people might think self-employed nanny = no tax, and therefore massive savings, which, ultimately it doesn't - as you confirm