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Cash in hand work

Accountant obligations?

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My apologies for making this post anonymous. I have been a forum user for many years but would prefer to post this query anonymously.

I have recently agreed to take on the payroll work for a new client who employs a nanny. I was put in touch with her by another client who uses the same nanny (with salary in excess of the personal allowance) so I know that any salary paid to the nanny by the second employer will need to be taxed.

I set up a PAYE scheme for the new client, at which point they advised me that they have been paying the nanny cash in hand for a few months but are not in a position to work out her backdated hours and bring their tax affairs up to date.

Some clarity over what I need to do next would be appreciated. I do not wish to continue to work for this client when they have such little regard for the law, and am aware that I need to make a report regarding the cash in hand work without notifying the client that I have done so. 

I am very anxious about the whole affair, and annoyed that I even took on the client in the first place, as the payroll work is not well paid and is already causing a huge amount of stress!

Any advice / confirmation that I am following the correct process would be much appreciated. Would others recommend reminding the client that what they are suggesting is against the law, or would this be considered to be "tipping off"?

Thank you.

Replies (29)

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By mrme89
09th Oct 2019 10:59

Reminding your client of their legal obligations is good advice and is not tipping off.

Even if your client hasn't kept records what they have paid to the nanny, the nanny certainly should have records so that they can submit their SATR accurately.

If the information is not forthcoming, then you may wish to disengage and file a SAR.

Thanks (1)
Replying to mrme89:
RLI
By lionofludesch
09th Oct 2019 16:07

Quote:

Even if your client hasn't kept records what they have paid to the nanny, the nanny certainly should have records so that they can submit their SATR accurately.

"Certainly" is a bit over the top, mrme. The nanny might well very reasonably have assumed she was on PAYE.

Be pragmatic. Did the lass's hours vary wildly ? How much did she get ? How big is the likely margin of error ? Ten bob or ten grand ?

The problem with washing your hands of the business is that even more tax is lost to the Exchequer because no one knows how to deal with the problem.

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By Roland195
09th Oct 2019 12:48

If the client is prepared to pay you do do it properly going forward with due attention to pension obligations etc then they are already far better than most employers of this nature I have encountered.

I'm not sure I understand why they think they can't work out the back dated hours other than can't be bothered but I would suggest that the PAYE/NI due on a part time nanny's 2nd job for a few months would be less than the cost of processing the payroll - The CIOT offer some guidance here on the correction of errors where the net benefit to the Exchequer is nil.

It would seem a far better outcome for all just to have the client tell you what they paid her or estimate it. I doubt they would notice the difference.

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By ImmanuelLieber
09th Oct 2019 13:20

Hardly counts as organised crime or large scale tax evasion. More a case of can't be bothered. Yes you could file a report but nothing will be done about it, I doubt it will even be read.
Ensure things are done right going forward, what went on before you took them on as a client is not your concern as it appears that you have no first hand knowledge of it, only what you have been told or surmised.

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By Justin Bryant
09th Oct 2019 13:44

That good old anti tax-avoidance campaigner Richard Murphy has a solution for this. See:

https://www.theguardian.com/money/2001/jan/14/childcare.observercashsection

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Replying to Justin Bryant:
Hallerud at Easter
By DJKL
09th Oct 2019 14:23

I started reading it and then quickly twigged it was miles out of date (10% CT rate gets a mention) The article is from 2001!!!!!!!!!!

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Replying to DJKL:
Psycho
By Wilson Philips
09th Oct 2019 15:05

Priceless (although still less than 20 years ago, so potentially caught by the nasty retrospective nanny charge).

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By ireallyshouldknowthisbut
09th Oct 2019 17:13

I can assure you anyone who has enough £££ to hire a Nanny has enough £££ to pay her taxes properly.

"not in a position to" means "catch me if you can"

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Replying to ireallyshouldknowthisbut:
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By Tomazaan
12th Oct 2019 15:57

I agree that anyone paying anyone to do a job for them needs to pay them properly and that included associated tax charges, whether it is PAYE or VAT. However, please don't assume that because a parent thinks that their children are better off being looked after in their own home by a sole carer that the parent must be wealthy. The parent might just have different spending priorities.

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Replying to Tomazaan:
RLI
By lionofludesch
12th Oct 2019 16:04

Quote:

I agree that anyone paying anyone to do a job for them needs to pay them properly and that included associated tax charges, whether it is PAYE or VAT. However, please don't assume that because a parent thinks that their children are better off being looked after in their own home by a sole carer that the parent must be wealthy. The parent might just have different spending priorities.

What ? They earn enough for themselves plus enough to pay someone else a wage and they're not wealthy ?

Aye. Right.

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RLI
By lionofludesch
09th Oct 2019 17:24

Ach - just submit an SAR if you don't think they're making a reasonable effort.

An approximation is one thing; saying it's zero because you couldn't be bothered to keep records is quite another.

These posh folk who don't think that taxes apply to them need winnowing out.

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Replying to lionofludesch:
Hallerud at Easter
By DJKL
09th Oct 2019 18:38

Wonder which member of the current government it is- no, cannot be them, this case is only over half a nanny.

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Replying to DJKL:
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By paulwakefield1
09th Oct 2019 18:47

Quote:

this case is only over half a nanny.

For some reason that phrase caused me to remember the old Goons joke:

"Can a lady with a wooden leg change a pound note?

No - she's only got half a knicker"

Boom, tish. I'll get my coat.

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By JDBENJAMIN
09th Oct 2019 19:19

Tell them it must ALL be declared (past AND future payments), and refuse to act further if they don't agree and file an SAR. That's what you're obliged to do by ethical standards. You can't ignore what went before.

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By penelope pitstop
10th Oct 2019 04:04

The reason the client employs a nanny is almost certainly because they do not have the time to deal with the kid(s) themselves. And if they do not have time to deal with the kid(s) themselves then they certainly will not have the time to get involved with that pathetic HMRC excuse for a piece of tax software known as "Basic PAYE Stools" and its deformed relative known as "Real Time Submission".

All that busy clients employing nannies want to do is to give the nannies £20/£50/£100 or whatever and then forget about it. But no. HMRC have to turn a mole hill into a mountain.

And then when the PAYE all goes pear-shaped (which it will), the all-too-busy employer then has to get on the telephone to HMRC and then use the dumb HMRC excuse for voice recognition technology to get through to the correct HMRC department, only to be told to look on the HMRC website for the proverbial "needle in a haystack".

And when making that frenetic phone call to HMRC, juggling making scrambled eggs for tea with changing the baby's nappy, you can just visualise the older kid at the same time flooding the bathroom with an overflowing bathtub.

C'mon now. Can you not understand why those busy, tiny employers just cannot face the ordeal of dealing with PAYE with all that they have on their plates.

And as for issuing a Suspicious Activity Report for these clients as someone mentioned in the first answer above, "yeah, right......."

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Replying to penelope pitstop:
By penelope pitstop
10th Oct 2019 04:05

And I hate these sorts of jobs because:

1) You can spend hours/days sorting them out and not get paid for your efforts
2) Client never appreciates what you have done
3) Get it wrong and HMRC will give you "a doing over"
4) Get it wrong and client will think you are an idiot
5) Your tiny economic return for your gargantuan efforts are completely disproportionate
6) You end up cussing under your breath because "the system" is stacked against you/against your client
7) You end up having evil thoughts about HMRC/HMRC staff/HMRC tax software
8) You take out your frustration on your spouse/family/pet hamster etc.

Sorry about this response but HMRC are in my bad books at the moment

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Replying to penelope pitstop:
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By Roland195
10th Oct 2019 10:37

What did we do with all the free time we must have had before SARs and AML became a thing?

I have my suspicions that some accountants frankly love the fact they can clype on their clients and they can wrap themselves in a warm, fuzzy feeling that not only is it their duty, it potentially may save lives.

I also don't understand where some practitioners on here find enough Paragons Of Virtue, Saints and Boy Scouts to be able to run a practice where the utter triviality mentioned is enough to shock them & have them reaching for the disengagement letter.

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Replying to Roland195:
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By ImmanuelLieber
10th Oct 2019 16:27

I tend to agree. Reporting someone who is importing half a ton of heroin is one thing, but a couple of hundred pounds worth of tax is another and not what the legislation was designed to be used for.
There really should be some sort of lower limit on it to stop every one's time being wasted by endless reports that are never going to be acted on but which serve only to clog up the system.

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Replying to ImmanuelLieber:
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By Roland195
10th Oct 2019 17:01

I gave up trying to make sense of any it when an "expert" at a course suggested we would be required to file a report for fly tipping - It's a criminal offence with the proceeds of the crime being the fees saved apparently.

You can only imagine what the staff at the NCA make of this.

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Replying to ImmanuelLieber:
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By ruth.julian
12th Oct 2019 20:25

If every UK taxpayer withholds £200 in tax, that is over £6bn lost to the Treasury every year.

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Replying to ImmanuelLieber:
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By ruth.julian
12th Oct 2019 20:25

If every UK taxpayer withholds £200 in tax, that is over £6bn lost to the Treasury every year.

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Replying to ruth.julian:
By penelope pitstop
13th Oct 2019 00:34

It is difficult or impossible for most PAYE employees to withhold any PAYE tax/NIC.

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By Matrix
10th Oct 2019 20:55

Work out what a typical month would be based on the info they have given or give you for October and use the same hours for the two months missed and treat the amount paid as net. Can’t she ask the nanny how much she paid her or for her to remind her of her previous hours, this is someone she trusts with her precious kids after all?

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By CMPACDGDB
11th Oct 2019 10:29

Your client is a muppet!

Obviously; so educate them that they must PAYE nanny from date you became aware or you cannot accept their business.
Given the vast sums involved, you will have probably forgotten any start date prior to this in view of the utter waste of national funds on BREXIT.....

A reality check and a little perspective goes a long way in the real world IMHO

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By [email protected]
11th Oct 2019 10:35

Do your clients have a tax-free childcare account where the Government adds 20p to every 80p put in by your client. The PAYE bill can be paid from that account.

Your client should be aware that employing someone is a serious responsibility and they could be taken to a tribunal if they get it wrong. Employing someone is not a hobby.
They will need to be aware of employment contracts, SMP, SSP, workplace pension, minimum wage, redundancy, health and safety, among others.

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By pauljohnston
11th Oct 2019 11:09

I think you have to file a SAR whatever since there has been a tax avasion. But if the nanny thought she was self-employed then this will cause you another headache.

Definely PAYe going forward and looking back it appears that Tax and NIC is due. Not sure whwther the client is limited to 4 years I hope not because the majority of the population have to pay their taxes and those that dont put a greater burden on the remainder.

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By Rgab1947
11th Oct 2019 11:27

Paying anyone by cash is not illegal.

Not keeping records/payroll what have you is.

Stop listening to the man in the pub better known as Treasury/Bank people wanting to get rid of cash.

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By Caber Feidh
11th Oct 2019 23:44

Perhaps it would be simpler all round if the client were to hire the nanny from an agency and let the agency take the strain of accounting for nanny's tax and NI.

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By penelope pitstop
13th Oct 2019 00:39

Some very poor people, even those with no taxable income, who have seriously disabled children may have to operate PAYE if they employ carers using local authority support.

So, you don't have to be super wealthy to employ someone.

I knew of some parents of an autistic child who got into some PAYE arrears because they fell foul of the PAYE regulations. They had so much on their plate the last thing they were worried about were "those stupid PAYE rules".

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