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.

athene - they would know if the nanny told them.

But I agree it is pretty common in London. I think about half the people I know with nannies do this to some extent. I just think that, morality aside, unless you know the nanny REALLY well, you are asking for trouble.

It also depends on your job of course - there are some professions where you absolutely can't afford to be caught on the take.

but she wouldn't have evidence if you paid her cash. i'm looking to contract a nanny for three days, and then she can pick up another part-time job or occasional babysitting or whatever on her other days. So my nanny will have other income anyway.
(again i stress that i am not advocating this practice, nor engaged in it.)
it would be easy for an angry nanny to point the finger, but harder to prove it, and even harder to make it worthwhile to HMRC to bother investigating it.

Yes, exactly. The nanny will have to prove her accusation for it to go anywhere. SO, if the employer is waise and leaves no paper trail, then I imagine they get away with it.

Do you know what I think would be intereting? To compare two figures:

1- The nannytax survey on average nanny salary
2- The IR records for nanny salary in the same year.

I bet the two figures are wildly different. IR will be too low because of all the cash in hand. And nannytax will be too high because their survey targets the high end of the nanny/nanny employer market.

Yes, if you were going to do this you'd have to make sure everything in writing was legit. The amount in the contract/payslips/going into bank account would all have to match up, and the rest just in cash.

but where would you get all teh cash from? The inland rev wouldn't have to be einstein to find that you were withdrawing x amount in cash every week and that that x corresponded with the discrepancy in your nanny's pay.

Unless you are in a job where you have large amounts of unaccounted-for cash lying around (eg a taxi driver maybe) then a truly untraceable transaction is difficult.

I'm not saying it's likely that this would happen or that they would go to all this trouble but personally (and I am a big wuss) I wouldn't be able to sleep at night just in case. I'm sure it's really common and all, but I'd prefer the peace of mind to the music lessons or whatever! But it's a personal decision at the end of the day.

If i withdraw a few hundred pounds out every week, who can say where i've spent it? it could be at the supermarket, on clothes, on a nanny, whatever.

Presumably the nanny receiving the say £150 per week is never going to put that money into her bank account. WIll just use that as her spending cash when she goes out for the night, shopping, or whatever else she spends her money on.

I am of course just arguing a point for the sake of a debate. I don't recommend this practise.

aside from whether or not you can get away with it/how likely it is you'll get caught, it's tax evasion and it's illegal. nanny has to pay her taxes just like the rest of us do.

I'm sorry, that's ludicrous- the idea that you're withdrawing X amount every week & that can be proven to be going to your nanny- I too (like Chandellina & like everyone else) withdraw some money every week to spend on various things eg supermarket etc. Its never a standard amount. Even if it were to include cash to be given to a nanny etc, it might be part of a larger amount every week. I think that there is no way something can be traced back through that.

Personally I think all this is beside the point though. The way I think about it is- if someone wants to practice this kind of thing, they will without leaving any paper trail, its surely not that hard to do for relatively small amounts & many people do it & we all know that. I think the important thing is that it's unethical to engage in tax dodging and for me that's the most important reason to not do it (which is why I don't).

I think it's quite common practice in London

Just because all the nannies are looking for £10/net doesn't mean you have to pay it
Make sure your contract gives the gross salary though

Incidentally, I don't think nanny employers are the only one practicing tax evasion. These ways can be applied to lots of types of employment. For example, the gardener who comes and does the job for less if you pay him in cash, or high cash business like a restaurant or a car park who doesn't report quite all of the revenue. I'm sure it happens all the time. Oh, let's not forget childminders who don't really report everything they take in.

Of course this stuff happens all the time.

I must be missing a trick. I report everything

I have a nanny friend who did this with her last job, one of the reasons she left was because she wanted to get a mortage and couldn't on what she had proof of earning, her boss used nannytax to pay her (wage slips etc) and as far as they knew and her contract stated she was on min wage, the difference in that and what she actually took home was paid cash in hand.

I also had that problem when I tried to get a mortgage as I was being paid some cash as the employers didn't want to pay tax on the same money twice. They came up trumps though and wrote a letter detailing my new responsibilities and therefore the increase in salary. Mortgage duly approved.

athene - you're right, in that it is the employer's responsibility to deduct tax from gross earnings and pay it straight to HMRC. but the tax in question is the nanny's income tax. so it's her that's not paying tax, iyswim (even if she hasn't committed an offence). just like the rest of us - our employer takes the tax off our wages - because they have to by law. but it's still our tax.

I know I said tax evasion, but I'm not sure in fact whether tax evasion, properly defined, comes into it. I wouldn;t be suprised if the offence in question - of not paying your employee's tax - has got another name.

athene - I completely misread your post . I thought you were making a completely different point to the entirely correct one you did make...I thought you were saying that it's the employer, not the nanny, who's doing the evading. sorry! just ignore me...

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.

OMG@above!!!

an 18yr may WANT?LIKE £10nett but surely no one would pay that would they - if they could get a nanny with 10yrs+ exp for that

£10nett is the higher end of the salary scale and if you cant afford it then tell agencys that your job offer is £8nett

so in answer to your Op - NO!!!! dont do it

To be fair I have not considered any 18 year old nannies so I should not have said ALL local nannies ask for the same salary. However, I guarantee that in my area of London you cannot find a nanny of any age, with good references and previous experience, who will consider less than £10. They just won't.

Anyway, the fact is I have found a great nanny and had always assumed I would declare all her salary to HMRC.

I have found this thread fascinating. Clearly it is very common to under-declare but there are very legitimate objections to under-declaring not to mention risks associated with it. Much food for thought.

the way i see it is why should my salary not be paid in full

it is still my money and salary that i have earned - just that the family pay it on my behalf iyswim

Wouldn't do it it's illegal also wouldn't employ someone who suggested it either, it would be a trust issue for me.

And as a CM EVERYTHING i earn is declared I don't take cash at all it goes into bank by STO, and have refused mindees when parents ask me to diddle figures.

It does harm your nanny because she misses out on NI contributions. Although that's more of an issue if she's on the cusp of employer paying NI/not paying NI....

I am also in London and have a nanny and I have to say £10 per hour net is actually VERY high, particularly in the current economic climate. Figures quoted by nanny agencies are not at all an accurate reflection of the market.

Not worth doing. There are two things you can never avoid: death and taxes.

Also in the modern workplace, there is a big difference between demanding a particular hourly rate for p/t or temp work, say £10 an hour, and the weekly rate for a permanent job, say £300 a week.

An example of this: if my current employer contracts me out to the private sector, they can currently get up to £1000 a day for my services. This does not mean I earn £365,000!!! (I wish!!!!!)

Sack the nanny

If she's dishonest, she's dishonest ...

I think some of you would be very surprised what HMRC can find out through very simple checks.