can I employ a nanny through my company?

[roundgirl]

I've recently set up my own limited company and wondered if it is possible to employ a nanny through the company to look after my 2 children? This would seem to bring tax advantages but am I missing something, and are there rules against this?

I had heard that you are not allowed to employ a nanny on a company payroll (not sure why) but you can employ someone as a 'creche manager' with your home as the workplace creche and your children as the only attendees - does anyone know if this is the way to do it? (or are neither of these routes worth the hassle!)

Has anybody else down this?

I would hazard a guess that your home would then need to be ofsted registered and the crèche open to any other employees. But I don't actually know.

The nanny's work isn't benefitting the company directly which is why you can't employ them on payroll.

I would highly suspect that the answer is No - with regard to having a nanny on company payroll.
With regard to having a workplace nursery, hmm not sure. I would expect that it wouldn't be worth the hassle or cost of setting such a thing up.

Would it be a crèche or a nursery... that's one thing to establish. A nursery is regulated, where as a crèche now isn't (though was in the past, thus may become regulated again in the future), plus many creche's are still registered but now under Voluntary registration rather than compulsory. With an unregistered crèche there are limits as to how long a child can be there... see The Childcare (Exemptions from Registration) Order 2008 - where it mentions about Exempt Temporary Provision.

Another potential problem I can see is to do with Planning Permission and Business Rates. Those would I feel need looking at, as your home would no longer be just your home but would be a place of work with a workplace nursery.

No, you can't do this.

You could of course hire an "office assistant", "business support", "cleaner", etc. and put him/her on the books. Apparently this is legal.

(I am just making a point about how ludicrous it is that childcare is not seen as something that supports the business but these other things are when childcare is so very very clearly a cost which is encurred for the sole purpose of going to work)

Hiya,

Thanks so much for all your help! I was wondering, when people say, no, you can't do this, is it because HMRC don't allow it, is it against tax rules? Or is it a no no because it's not worth doing from a tax saving perspective once all other factors are taken into account, such as business rates, regulatory concerns etc?

Thanks again! Round Girl

I think it was IR35 which put a stop to nannies being an employee of a company.

I feel it's not worth setting up a workplace nursery due to the costs involved, childcare regulations, planning permission, business rates etc. Haven't done that much research into it though, so could be wrong. My gut feeling though is that it isn't worth the hassle.

Oh I think IR35 was due to another way that was being used to get around some of the tax... think in that case it was the nanny who setup a company, which supplied a service.

Where's MrAnchovy when you need him

Telegraph article from 2003, regarding Nannies running a personal service company.

HMRC: E18 has some info about Workplace Nurseries. Looks to me like it would need to be registered (with Ofsted if in England) in order to meet requirements. Therefore would need to comply with Ofsted regulations, so things like minimum number of staff, child to adult ratios, space requirements, disabled access.

can't have a workplace nursery in your own home, but can buy space(s) in another nursery. Probably not tax effective, but depends on particular situation.

That's the legislation which effectively blocked off SE nannies as well, isn't it, nick?

I have asked my accountant this precise question and he told me it was absolutely not allowed under HMRC rules, nor can I offset the costs of Nannytax payroll against my tax bill, which seems even harsher (as I can offset my other accountancy costs).

I am apparently allowed a chauffeur, though.

Is there anything to stop you calling a nanny a chauffeur?

frakkinnuts - yes, I expect so.

Thanks so much for all this help!

I work as a nanny to a local lady who works at home and she can not pay me through her ltd business but she can claim a small amount through tax credits for childcare as I am ofsted registered.

No your company cannot employ a nanny to look after your children - whatever agreements you try to put in place the law will 'see through' them and treat the relationship for what it is - you employing a nanny to look after your children.

Any payments made by the company to the nanny or of PAYE to the Inland Revenue will not be treated as expenses of the company (so will not be deducted from the taxable profit of the company), instead they will be viewed as loans to you which if you are a director may not be legal, and if interest-free will count as a taxable benefit.

There is therfore no potential tax benefit, some additional cost and a whole load of hassle from HMRC. Don't do it.

Your most tax-efficient way of taking income from the company is probably via dividends, but if you are not doing that and are taking a salary, particularly if it is taxed at the higher rate, you could consider operating a childcare voucher scheme which could save you up to ?£225 off the top of my head, plus some NI saving for the company (less a bit for the admin cost). Or if you use a childminder or nursery (but not a nanny) you could pay them directly from the company and achieve the same saving.

You can't employ someone to look after your children and claim that they are a chauffeur or admin. assistant. If you do this you are exposing yourself not only to repaying any tax you have evaded, plus a penalty, but also a criminal charge of fraud. REALLY don't do this.

You could of course set up a genuine workplace nursery although I cannot imagine it would be worth the effort.

If you want to save tax get an accountant.

Oh the personal service company for nannies thing was IMHO a big red herring: there was a potential tax saving here until changes were made in the 2003 Budget, but because of the complexity of the structure involved and the fact that in order for the employer to gain the saving a huge burden would be placed on the nanny, plus the loss of many of her employment rights (so why should she do it, unless for more money which would erode the savings?), I don't believe that there could ever have been anything like the 'tens of thousands' of cases quoted at the time.

Thanks all! I think that really clears it up!!