nanny share - one family wants to pay cash

[chandellina]

without getting into the morality of it, what would happen if two families shared a nanny, with separate contracts, family a paying tax on the earnings they pay, family b only paying cash for their (net) half?

Does family a have a liability if family b gets caught?

how is the share split? days for each family or looking after all the children all week?

it would be the same days for both families. (a complete overlap)

in that case I think family a would have a hard time convincing the tax man that they knew nothing about it

that's probably true, but in the normal course of things, would I actually see family b's contract anyway, or have proof they paid tax unless we applied for a split tax code?

and are you culpable if you know someone isn't paying tax?

I guess I wouldn't fancy a share unless it was on the same basis
I'll bet their contract won't mention the tax avoidance

What's in it for family a?

Regardless of what bits of paper you have or haven't got in place, HMRC will usually view a situation where kids are being looked after together as a single employment. This means that the 'employer' is you and the other family acting jointly, and you are therefore jointly liable for operating PAYE on the whole of the amount the nanny receives in this employment.

it's not easy finding a nearby family with a child the same age looking for a share for the same days and hours. with shared views on routines, activities, etc.

i'm just considering all the options, but clearly some of those options could be a step too far.

thanks MrAnchovy. but each registers as a separate employer, no? i've seen lots of different advice out there ... minefield.

I think it is reasonably common for people to put a lower salary in the contract and through the PAYE and then top up with cash in hand

In the proposed arrangement family b gets a very cheap deal with family a effectively providing the cover that the employment is all above board

there was a discussion about offering a cash component last week, i recall.

pretty much everything I'm reading says it's best to have two contracts and operate as two employers, but then it seems you could well be contracting for pay that on its own would be below minimum wage. (e.g., net pay of £8 hour would be around £9.80 gross, or just £4.90 per each family per hour.)

I would think it would depend on whether the three of you draw up one single contract or each employer has his/her own contract with the nanny. Surely you can not be held responsible for any part of a contract which you have not signed up to.

If you have your own contract which pays the nanny say £6 per hour gross for your job (i.e. looking after your children) then the other contract is nothing to do with you. I don't know how min wage works into this -- ie whether each parent would have to pay minimum wage for this time.

It does seem a bit dodgy, but I know it is done. I once had a nanny who was paid legally by me. But she picked up another family from the school gate (which I said she could do) and they paid her cash in hand. No contract. Just cash as and when she worked.

Yes it is best if there are two employments, that way you get two lots of NI-free pay.

But in an audit or investigation, HMRC will look at the facts of the employment, not how many bits of paper there are and who has signed up to them.

It is going to be very difficult to make a case that one person looking after a number of children in a single place is in fact doing two jobs at the same time and throws up a number of anomolies, including the minimum wage problem. On the other hand if one family employs the nanny for 2.5 days a week and the other family for the other 2.5 days, this would almost certainly be two employments. That means two employers, two contracts, two sets of terms of conditions and no obligation on family 'A' in respect of what family 'B' does. It would make sense if family 'A' is the first employer that uses the normal tax code for the employee.

To be clear AtheneNoctua, of course you can not in general be 'held responsible' for any part of a contract to which you are not a party, but the obligation to operate PAYE is not a contractual one. The fact of employing someone creates a statutory obligation to operate PAYE on the whole of the emolumnets for that employment. And if it is a fact that there is only one employment, each individual that together comprise the 'employer' is jointly and severally liable to operate PAYE in respect of the whole of the emoluments for that employment. In your case it sounds like there were two employments. And please don't say there was no contract, if there is an agreement between two or more parties about what they are going to do, and the parties intend to rely on that agreement, then (in general and with a couple of technical caveats) there is a contract and the parties will be bound by what they have agreed whether any part of it is written down or not.

So, if Ms. Smith employs a nanny in the usual legal way, and the nanny looks after another kid one day a week during the same hours she loooks after the Smith kids and takes say £100 in cash from other kids mum, Mrs. Smith would be liable for the tax evasion?

That sounds very unfair. Good thing I was onlyu kidding about my story.

Athene - I think MrAnchovy was only saying that would be the case if it were One Employment (such as a nannyshare where the children were always cared for together).

Nick, sorry I wasn't clear. I meant at the same time. Say Mrs Smith works full time 5 days a week and on one of those days nanny arranges to also look after some other kids and takes cash in hand for it. Ms. Smith maybe thinks it's a standing playdate or maybe knows exactly what is going on.

Not much point in looking at hypothetical situations, but for what it is worth I think the situation you describe, unlike the situation in the original post, would probably not be looked at as a single joint employment.

I would not allow my nanny to take money for looking after other people's children in my home.

you might if it meant you yourself could then afford the cost of the nanny.

(or someone might.)

there's a big difference between paying £12 gross or £6 gross, or even subsidising the other family and paying more than half.

Sorry chandellina, that didn't come out right. I would be perfectly happy to have a nanny look after my and other kids in my home in a nanny sharing arrangement like you propose.

I would not be happy for a nanny to arrange directly with another parent, without me being involved, to be paid to look after their children in my home like AN hypothetically proposed.

I should have stuck to my own rule of not to get sucked in to hypothetical arguments.

i see what you mean.

i'm involved in way too many hypotheticals at the moment.

I am baffled by the exclusion of hypothetical situation from MN chat boards. So many threads will have to be removed from MN right now to satisfy your desire on this one.

Actually I didn't say anything about in whose home the care took place. My nanny technically works in my home. But, in reality, they are hardly ever there. It is quite feasible she could say to me, "Do you mind if I also look after Johnny on Thursdays? I could use the extra money and it won't intefere with the job I already do for you. And DS and Johnny get on great. I think it would be nice for them" and I say "Sure. So long as it doesn't affect the attention you give to my kids" Off she goes and arranges cash in hand. So, in this situation, you seem to be saying that it is one single employment and I am liable for this cash in hand arrangement which I actually have had no hand in. I'm no expert on the law so I don't know how it is likely to be viewed in court. But, I do think it sounds unreasable for parents to have responsibility over something they were not actively involved in.

Do I really seem to be saying that it is one single employment in your case?

What I actually wrote was "In your case it sounds like there were two employments" and "I think the situation you describe, unlike the situation in the original post, would probably not be looked at as a single joint employment".

But I am not going to get sucked in.

It's not my case. It is a hypothetical situation. Remember?

I'm trying to work out where you think the line should be draw between the hypothetical two employment stiuation and the OP's situation which you thought would be viewed as one employment.

i just wanted to mention that I called one of the nanny payroll services, and they advised me that it would have nothing to do with me if family b didn't pay their tax, even if the nanny worked at my house watching their child. (I think what he really might have been saying though was that they'd never catch wind of it.)

In case it's of any interest, he advised we split the day in half so that family a contracts for the morning and family b for the afternoon, keeping the employments separate (and splitting tax code) and getting around any minimum wage issues. I was surprised you could do this with a share where hours almost fully overlap, but he assured me they had taken official advice.

Thanks for coming back, I suggested you split the week in half but splitting the days in half is an even better idea as it makes more sense for holidays, sick pay etc.