Nanny with 2 jobs: tax questions

[MrsHappy]

Hi- I'm sorry to post yet another thread about this complex (and turgid) area but I have some questions...

What is the situation if a nanny works for one family (net pay agreement) and then takes on a second job?

I had always understood that the nanny had the option of splitting her tax code but that this would be her decision and she would have to sign paperwork in order for it to become effective. Is this correct? Can the tax code split become effective retrospectively?

Is there any HMRC definition of a nanny share? Why does having two nanny jobs sometimes involve code-splitting when having two non-nanny jobs at the same time would not? This makes no sense to me!
A situation has arisen where my payroll providers inform me that, on the say so of the second employer, they have been splitting our nanny's tax code for the past few months. It is the first the nanny has heard of it (me too) and no documents have been signed. The payroll people say that this will be the status quo unless the nanny tells them otherwise but isn't that completely backwards? (Am bothered about whether the payroll people are up to snuff).Can anyone clarify the situation? Thanks

PAYE wise jobs are to my knowledge always done as Gross salary, so the NET pay job will have a Gross pay figure - though the nanny may not know it.
As the secondary employer, you would use BR tax code, unless HMRC tell you otherwise.

To split a tax code the nanny needs to contact their tax office and convince HMRC that a tax code split is what they want to do. It can't be back dated to my knowledge... would not make sense if it could. The tax office DOES NOT have to agree to splitting the tax code. The other family involved may not want to split the tax code either, though it would ultimately be the nannies choice (but I would have expected the net pay agreement to end).

No HMRC definition of a nannyshare as far as I am aware. The TaxNanny website has a good page about the various ways a nannyshare can be split. Note: A nannyshare is when all the children are cared for at least part of the time. Where a nanny works for Family A on some days and Family B on other days, it is two separate employments... at least that is how I understand it.

Tax split in my view would only occur when the nanny is doing a nannyshare, not two separate jobs. Though of course it's up to HMRC to decide. Makes no sense to me either, as I've never split my taxcode between employers, even when working part-time as a nanny and part-time in nursery.

"A situation has arisen where my payroll providers inform me that, on the say so of the second employer, they have been splitting our nanny's tax code for the past few months. It is the first the nanny has heard of it (me too) and no documents have been signed. The payroll people say that this will be the status quo unless the nanny tells them otherwise but isn't that completely backwards?"

I would immediately terminate the payroll company. They should not in my view be making changes to the way that PAYE is operated on your behalf without getting your prior written consent.
I agree, it's completely backwards. How have the payroll company managed it - did they fake a letter to HMRC? Does HMRC even know - call them, you are the person ultimately responsible for operating your PAYE scheme so you need to understand what has happened and how it can be changed. Employer helpline: 08457 143 143

Thanks nannynick - that is really helpful. I will be terminating the contract and will be demanding my current subscription money back. This is not the first time they have made a mistake and I am getting sick of my unofficial supervisory role...

Do you happen to know how it is decided who must use the BR tax code? Am I right in thinking that if one person employs a nanny (regardless of the hours worked for that employment), a second part-time employer must always use the BR code, even if the nanny is paid more by that second employer?

I don't know for sure... alas I am not a tax expert, just a nanny
The BR code is used when BOX C on the P46 is ticked. So the nanny should have ticked that for their second job.
As far as I understand it, it is up to the nanny to hand over the P45 to the primary employer and complete a P46 for the secondary employer.

HMRC: Two Part Time Jobs - this may help a little.

HMRC: More than one job - this also mentions split tax coding.

If the first employer was paying below the Personal Allowance, then it makes sense to split the tax code. But I can't see how it is beneficial otherwise.

When an employees tax code is changed, HMRC issue a P6 (Example P6). This I think can be issued electronically now, so I would guess that the payroll agency has this, if you have not been sent it.

How does the payroll company know who the second employer is? If the same payroll company is doing your payroll and the other employers payroll, then they will know... but in that situation, shouldn't they be keeping the financial information separate? Is your nanny sure that they didn't agree to it?

Leaving the payroll company now may not be a wise move, as you need to get them to unravel what has occurred. However you do need to make it clear to them that the nanny did not ask for the taxcode to be split... so your job being the Primary job should be using the full personal allowance. Ask them about the P6, obtain a copy of that. Then contact the tax office and see if they can use the information from the P6 to trace when the split was requested and with luck by whom.
Your nanny could also write to the tax office to request that the split be stopped and that you get reallocated their full personal tax allowance.
It all seems to be quite a mess... sorting that mess out yourself could prove rather tricky, so I feel the payroll company needs to sort it out with discussion with you and your nanny plus the tax office.
Once sorted... ditch the payroll company and do the tax yourself using HMRC Online and the Employers CD-ROM.

HMRC issue the tax codes, not the employer, nor the employee, though there are rules for the start of a new employment s to what happens until a tax code is issued. The nanny can ask for her code to be shared across her different employments, and hmrc will usually honour this. Provided both employments are on a gross basis there shouldn't be a significant cashflow issue for the employers. Of course where a net pay agreement is in place then the difference can be very significant.

The issue here isn't really about which tax code you should be using, but rather about why you decided to use a net pay arrangement rather than a gross pay agreement which the vast majority of people have. I think that your best solution is actually to agree a gross rate of pay with your nanny. You don't have any right to ask her to arrange her tax affairs in a particular way (unless you have stipulated this in your contract?)

LadyMuck - in this case though the nanny isn't saying that they have changed their tax coding and are not aware that the tax coding has been changed. I do wonder if that is actually the case, as the nanny I would have thought would have been sent coding notices.

In the OP: "It is the first the nanny has heard of it (me too) and no documents have been signed."

Why would HMRC split the tax code, when the nanny didn't request them to do so?
Or has the nanny requested the change... but isn't telling the truth to MrsHappy.

MrsHappy - in the contract you have, did you state the gross salary?

To be honest, as it doesn't matter too much to HMRC as to how the code is split so long as the allowances do not exceed the entitlement, then it is possible that new employer requested the code split on nanny's behalf. Nanny would have got copy of notice of coding, but only if the address that hmrc have for her is up to date. But regardless I don't think that it is terribly efficient to try and unravel all of the intricacies of the nanny's tax code unless the OP wants to get into some direct discussion with the other employers too.

The OP needs to ensure that she has a gross wage agreement in place with the nanny unless there are specific reasons as to why she would want to indemnify the nanny's tax position (bearing in mind that she can always just give a pay adjustment if the nanny felt that her wages had fallen behind market rates).

We did have a net pay agreement in place during the relevent period (the 2 employments have now stopped) although now there is a gross arrangement in place.

If our nanny had instigated a tax code split I would have no issue with it. She had a second job for only a few months, in part to help us out. But since she did not it seems to me that the payroll company have acted in a really dubious manner by changing her code without notifying either her or me and I want to know what happened and whether it was correctly done from HMRC's perspective.

And given that this payroll company have told me I owed too much tax in the past I am keeping a close eye on them...

Think my first port of call is the Revenue to find out what their procedure is. I am certain the nanny is telling the truth - she has no reason not to.

The payroll company should be able to produce copies of the notice of coding from HMRC. I doubt that, if a split has been requested, that HMRC would have recorded who made the request, but it is worth a try.