Our nanny has suggested we only declare 50% of her hours for tax purposes WWYD?

[artichokes]

Me again.

We have just chosen a new sole charge nanny for our daughters. This will be the first time we have been sole employers of a nanny (previously we have been teh second family in a share).

We have yet to agree a contract with the nanny who starts in a few weeks. She will be working a 41 hour week for a net payment of £10 an hour. She has suggested we might only declare 20 hours a week for tax and NI purposes. This would save us approx £70 a week. The reason she came-up with this idea is she wanted to take the girls to various local music and dance classes which are expensive. I said I was not sure we would be able to afford these classes and she suggested the tax solution. In her opinion it would not harm her as long as some tax is being paid in her name.

What do people think of this suggestion? Obivouly we are tempted as the girls would love to attend the classes.

I don't have a nanny but I wouldn't do it. In part because I don't think it's fair, but also because with a nanny you don't yet know you are putting yourself in a very difficult position with regard to future problems.

Are you already salary sacrificing to pay part of her salary? That would save you about £400 a month if you are higher rate tax payers.

I wouldn't. Sorry! Tempting, but wrong!

No, it is you who will get in to trouble if caught. You are the employer it is your responsibility.

I wouldn't do it, tempting as it sounds.

Don't do it.

Don't play games with the Inland Revenue, they play harder. And it will probably be you in trouble should the deception be discovered, not her

Don't do it. Don't even think about it. And no matter how helpful the suggestion is for you in terms of cost, it's not worth it.

That sort of arrangement could come back to haunt you in a few years time and you could find yourself liable to pay unpaid tax, what happens if you part on bad terms she could easily say that you have underpaid her and demand all the extra pay that you haven't declared. Bad idea!!! perhaps find a cheaper nanny or negotiate with this one.

don't do it - it's definitely you they come after - as her employer it's your responsibility to pay her tax and NI. you don't need £70 a week to attend music and dance classes - find another way of cutting enough household costs to cover some of the classes.

DO NOT EVEN THINK OF DOING THIS!!

It will come back and bite you on the bum big time!

Do not mess witht he tax man - eventually you will lose.

Do your LO do all htese dance classes at the moment? If not then they're not really losing anything are they. It makes the nanny's life easier I know I was one for 10 years!) there are plently of other cheaper things she can do with the children, if she's not happy to do these then I would question her ability to do the job.

The nanny is quite right - her proposed solution won't harm her (unless of course, she applies for a mortgage or loan in which case she will be assessed on the basis of her low salary) - it is you as the employer who will be prosecuted!

If you can't afford the music and dance classes, the nanny needs to come up with some cheaper altrnatives. There are lots of cheap/free things to do with children - library storytime, toddler groups etc. As a good nanny, her response to you should not be to defraud the taxman in order to finance expensive activities but some suggestions of cheaper alternatives!

Don't do it.

To be honest, it would make me think twice about employing her.

Right, not a popular suggestion then!

Its not uncommon though is it? I know two families who admit to doing this so there are probably many more who do not. However, I accept it is probably a risky plan.

I don't have any qualms about her for making the suggestion. She is a fab nanny and she did have lots of ideas for free activities. Its just she knows the girls do these classes with me (on maternity leave) and she thought it would be nice for them to continue.

theyoungvisiter - can I ask what salary sacrifying means? Is that childcare vouchers? (Also do I remember you from the Dec 08 antenatal thread? How are you doing?).

Yes you probably shouldn't do it... BUT it is very common and I should think more nanny employers underdeclare than not in London.

It wouldn't make me doubt the nanny at all - it is quite a common practice and it's probably been the set up in previous jobs she'd had. I'm a nanny in London and only one of my previous employers has declared the exact amount they were paying me.

Lower the salary instead. Say to £10 gross per hour instead of £10 net. You should be agreeing gross salary anyway.

Lowering the salary is not an option around here. All the nannies around here expect and require £10 net, all the agencies state £10 net is the norm (none of them seem to mention gross). We are lucky she is just asking for £10 net, several I interviewed expected that plus evening use of our car and gym membership!

I do find it odd that a nanny with one year's experience expects the same pay as someone with 20 year's experience.

Limon - I am interested that you say this is so common in London (we are in London). Do people work to misleading contracts that state they work less hours than they really work, or do the contracts state the true hours?

I am intrigued by this idea of a nanny dictating what she wants paying. When I was nannying it was what the employer offered, not what I asked for.

hello arti, we're doing fine thanks! How are you?

Salary sacrifice is where you give up part of your salary (pre-tax and NI) in return for childcare vouchers. You can claim a max of £243 per tax payer per month at present.

If you are a higher rate tax payer then £486 worth of childcare would normally cost you nearly £900 in gross wages. But by salary sacrificing you don't pay any tax or NI on that part of your income.

The downsides are 1) your employer has to agree to join a scheme (if they are not already in one) and 2) your nanny has to register with ofsted in order to get the vouchers.

If your employer is not in a scheme then consider starting a petition at work - I know of several people that's worked for. It costs the employer very little and makes such a substantial saving to employees that it's really inexcusable for larger employers not to offer it.

it will work fine until she falls out with you whereupon , she will leave and shop you to the taxman...

How come no-one has mentioned the ethics of tax dodging yet?

"I do find it odd that a nanny with one year's experience expects the same pay as someone with 20 year's experience."
I find that odd as well, it's not something I've come across. IME nannies get paid more the more quals and experience they have.

I'm not sure how people do it in the contract tbh - I guess either they put the net amount and sort out the gross separately, or put less money/hours in the contract. So, for example, they agree to pay the nanny £400 net a week - they put £300 gross a week in the contract and that's what goes through the payroll company (giving the nanny £250 net) and then pay £150 to her in cash. So the employers save £100 a week in tax. The figures there are just guesses btw.

I can't believe that in this market you can't find a good nanny to work for £10 gross and then pay for the girls to continue dance.

in SE London I am also finding that virtually all nannies, regardless of experience, are looking for £10/net. And no one wants to talk about gross.

paying part in cash is also apparently very much the norm in my area. I don't fancy doing it, but i also don't think HMRC are as clued up as the people on this board make out. They've lost DH's tax returns enough times, assigned him multiple numbers, ended up owing him money when they said he owed them, all sorts of mess-ups, that really make me doubt their abilities to nail a British nanny receiving a bit of cash on the side.

of course it's different if someone is on a student or working visa and needs to prove they are living off of taxable income.

I don't think HMRC has the resources to track down a nanny taking a bit on the side - it's more if things turned sour later then the nanny could threaten to report the evasion to HMRC. And it would be Artichokes, as employer, who would be responsible.

The nanny would have evidence from her bank statements that the pay she was receiving was not in line with the pay on her contract. I'm not saying she WOULD do that, but it's putting yourself in a dodgy position.

I've always suspected that at least some of the people on MN are lying. My nannies always have nanny friends who are making some of their money cash in hand.

Assuming one writes the contract to match the amount they are paying on the books, I don't know how anyone would ever know.

Well, surely, artickokes would give her the money which is not on the books as cash and not wire it into her account where it could be traced.

I'm not suggesting artichoke take part in this plan for tax evasion. But, I am saying that a lot of people do it, and a lot of people don't get caught. And I think some of the people on MN are lying. Not all... but some.