Tax-Nerd Wanted - should I incorporate myself?

[Kif]

I've got pregnant with my second baby. Already spending most of my salary on childcare. Will get worse with the second - although an option of a higher paid job which will almost compensate.
If I set myself up as a company, could I take on a nanny as an 'employee' of Kif Incorporated, and offset what I pay my nanny against my income, and hence only be taxed on the remainder?
Can't find anything on the internet which addresses this. Definitely not in the business of 'fiddling' anything - but to me it feels quite legitimate to claim a nanny as an essential employee to Kif Incorporated. After all, without a nanny, Kif Inc. wouldn't be able to work.

you mean you will be getting your income from kif too not as an employee of someone else?

I would get my employer to employ me as a contractor (i.e. buy a service from Kif Ltd).

Instead of paying me a salary, they will be invoiced by Kif Ltd.

Kif Inc. will use this money to pay its employee (nanny) in the first instance.

The remainder (diddly squat) will be paid out to me as some combination of a salary and an end of year dividend.

Kif I am a lawyer nerd, not a tax nerd, but my advice is speak to Revenue & Customs (I still call them Inland Revenue, I hate it when Govt. Dept's change name, so annoying !!)

They will be able to let you know what is or isn't tax deductable.

What do you mean by incorporate yourself ? Are you a sole trader or Ltd company ?

They have different tax implications, which again the R&C should be able to help out with.

Have you tried looking on their website ? There must be some info. there or brochures they can send you ?

it won't work. it will only be a deductible expense for Kif Limited if it is incurred in the course of business - which it isn't. It could also be considered a benefit in kind to you as a director of Kif Limited and taxable to you.

If this worked, every nanny employer would do it.

yes, you would be taxed on the value of the childcare benefit I would have thought (if you are a dir or earn more than a certain amount - not 100% sure, something like £8.5k)

Hmmm. I did think it was too neat.

I'm still inclined to argue the point - in the course of my business I need to employ an assistant who looks after my children - the way that i might employ an assistant to answer my calls, or to drive me to jobs, or to clean my office (which might be my home, of I worked from there)....

I'm dead frustrated about the 'double tax aspect of it. I wouldn't need ot pay a nanny if i didn't work - and since I have this need, i actually 'earn' only a fraction of what I'm taxed on. I pay tax once for myself, then a second time for the nanny.

Koolkat - i was thinking Ltd.

does your company do childcare vouchers?

thinking about it some more you might actually increase your tax bill by doing this as you will need to charge VAT on your invoices if Kif Limited is providing taxable supply and you won't have any or much input VAT to offset it

Also unless you are legitimately a contractor, your company would be unable to pay you as such. You have to fulfil certain conditions such as transferability, more than one employer etc to be classed asa contractor, and would also not be eligible for employee benefits like pension/healthcare.

Other people work as contractors in my industry - often where they are higher rate tax payers. Not unheard of.

I'd lose the benefits - true. as a mother, I guess i amek more lavish use than most of these.

My company do do childcare vouchers, but max £100 a month. Will barely scratch the surface with 2.

Speculative question: if a (proper!) company had a crèche for employees children – how would the tax work on that? In substance, it is still a benefit in kind to the employees. Would you really have to tax each employee individually for their consumption of this service?

I think (to encourage workplace nurseries) there is no tax/NI effect on the salary sacrifice for a workplace nursery scheme. Can't remember when that came in.

You mean it is tax-favourable way of doing childcare?

So where is the boundary?

If a company had a creche for its employees they would have to tax their emplyees for the use of that creeche. They would not have to pay tax and NI on the amount allowed under the salary sacrifice scheme as long as the criteria were met. but any extra amount would have to be taxed.

In practiceI think, most company creches are actually separate childcare business subbsidised by the company.

Childcare is not tax deductable, it clearly says this on the self assessment forms and stuff.