Paying tax

[Butterflyfox]

So my full time nanny is moving away after many years. I declare her full salary and pay tax and pension etc as the law requires and as I thought was normal. It’s obviously a LOT of money but I am a solo parent with a big job and nanny is the only option. So my outgoing Nanny has been offered several roles as cash in hand or as a basic reported salary of minimum wage or so and the rest in cash. I’ve just learned my new nanny had a similar arrangement with her previous family. These other families clearly have more cash than me. Two earners, Bigger houses and private schools etc. I feel both frustrated and a mug paying £thousands in tax. Please tell me these are outliers and most people do the right thing.

I've never been offered that arrangement. Maybe parents know I would not accept it. I do not doubt that it happens but a lot of nannies know it can be bad for them as on paper they are being paid less - so affects entitlement to benefits, mortgage eligibility, that sort of thing.

I've heard from nannies that are being paid by the parents business, that seems wrong to me as the nanny does not work for the business, they work for the parents. So I guess there are some accountants around who are allowing that, maybe disguising it in some way such as as the nannies job title being to do with a role in the business.

Some people will try these sort of things and hope not to get caught. Others would never do it. You are abiding by the rules, which is what I would be expecting from a parent who employed me and I would like to think that many nannies would expect that as well.

Thank you for responding @nannynick I feel a little better already!

As the employer, you have an obligation to account for tax properly. With HMRC cotton onto it (realistically, unlikely, but you never know), the tax interest and penalties that you might have to pay would be horrendous.

From a practical perspective, if you don't deal with the tax properly, then the nanny, and anyone else who knows about it, has a hold over you. The nanny also knows that you are not honest, and she may therefore think that it's not important for her to be honest in relation to you too.

Butterfly, I realise that my post might have implied that you were doing this, and clearly you're not.

I think anyone who tries to do this is stupid, in so many ways...

Thanks you for the clarification @SeaRabbit yes I am absolutely not doing this - but I learned many others are and am a bit shocked by it hence the post

Unfortunately, I think it's very common for part of a nannies salary to be paid cash in hand.

I've never had this arrangement myself, but I would say 90% of the nannies I know are either in this situation now, have been in the past or have been asked if they would accept it and turned it down.

It is annoying when you see other people benefitting from doing the wrong thing whilst you're struggling to do the right thing, but you ARE doing the right thing and you can sleep easy at night knowing that.

I’ve always paid everything on the books. But I do know some families who don’t (and they are wealthier than me). It does piss me off but I am very vocal about it to my nanny and her mates about the benefits for them.

I had nannies for many years. I absolutely did everything by the book and paid everything owed. I am not a mug, just an honest citizen, and I wouldn't dream of doing anything differently.

This is shocking to me. I know many nannies and fortunately none are paid like this

I've heard from nannies that are being paid by the parents business, that seems wrong to me as the nanny does not work for the business, they work for the parents. So I guess there are some accountants around who are allowing that, maybe disguising it in some way such as as the nannies job title being to do with a role in the business.

A business can absolutely pay for childcare to allow directors/employees to work - some places still have creches for staff to use. My ltd company has paid for after school club and holiday clubs to allow DH and into work. Absolutely fine. And a nanny is potentially no different.

Of course you were doing things correctly. The others were 'fiddling' their tax.
It can come back to bite them, as for example, I believe furloughed staff were paid up to 80 percent of salary (up to a max). I think self employed people also got something. However, if their records show very little salary, then they won't get very much.
Also, I am one of these people who once came under a tax investigation! Horrendous!. I am a normal person who was paid PAYE, then made redundant. I had to produce all bank statements, and loads of other stuff to prove income and outgoings, over an entire year. (Obviously all OK, in my case).
So, you never know how these things will work out in the end.

@NavigatingAdolescence Are you talking about Employer Supported Childcare? That was closed to new applicants in October 2018, along with Childcare Vouchers which was a type of ESC.
The nanny must be a registered childcare provider and there would be a maximum amount that can be paid under the scheme.
So I feel that using ESC is unlikely but I will agree with you that it might be the situation.

No, I don’t.

We paid for external childcare as a business expense. It didn’t amount to much in the end and was suggested by our accountant as it enabled the business to function.

www.thefriendlyaccountants.co.uk/can-company-claim-tax-relief-childcare-costs/

Thanks for that link, it explains Employer Supported Childcare much better than the GovUK does.

Using ESC is possible but there are various conditions which make paying a nanny via it much harder... for example they cannot claim the nanny is running a creche for the business, if that was run from the parents home:

www.legislation.gov.uk/ukpga/2003/1/part/4/chapter/11/crossheading/childcare

(4)Condition B is that—
(a)the premises on which the care is provided are not used wholly or mainly as a private dwelling, and
(b)any applicable registration requirement is met.

So in my view it is difficult to use this scheme to pay a nanny, though may not be impossible.