Nanny paid via Co payroll

Convincing parent it is illegal to employ nanny through co payroll

Didn't find your answer?

Hello!

I am having a battle with a parent that insists that he puts his nanny through the company payroll just becuase he has added a couple of PA tasks to the job description

Does anyone know how to find the specific legislation from HMRC that confirms you can't?

According to a well know nanny tax bureau, they say:

Employers of nanny-PAs need to be aware that, under HMRC rules, they may not put their nanny's pay through their limited company's payroll, even if their nanny is working a hybrid role which includes business-related PA tasks. Where the priority is childcare, normal nanny payroll rules apply

However I can't see this legislation anywhere to send to the parent.

Any help appreciated!

Thank you!

Replies (29)

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By Rammstein1
04th Mar 2024 09:41

I don't think it is illegal, it would be a benefit in kind for the parent.

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Replying to Rammstein1:
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By paul.benny
04th Mar 2024 10:03

+1

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Replying to Rammstein1:
RLI
By lionofludesch
04th Mar 2024 13:26

+2

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Replying to Justin Bryant:
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By sammywitters
04th Mar 2024 12:18

thank you
the article is very old and it seems that HMRC view may have changed, however I can't actually see anything published to confirm that, which is annoying!

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Replying to sammywitters:
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By Tax Dragon
04th Mar 2024 13:03

I'm not sure what you think has changed or what you are looking for.

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Replying to sammywitters:
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By FactChecker
04th Mar 2024 18:24

To be fair, despite the inherent danger of using old web-pages, I can see nothing in Justin's link with which I would expect HMRC to disagree. Indeed it clearly states:
"By doing this, the nanny’s salary would be treated as a benefit in kind, which means that it would be subject to personal tax on you, and Class 1A NIC (@ 13.8%) on your company."

And, as TD says, it's not clear what exactly you're hoping to see 'confirmed'.
There isn't legislation or even guidance for every possible scenario - just the rules which, when applied to a scenario, will usually give you the answers.

And to quote TD, out of context but in an earlier thread of yours also regarding nannies being paid via a company, from 18th Aug 2023 18:35:
"it's generally ill-conceived to employ nannies via your company, as the nanny's salary is a cost to the company and the role the nanny performs is for the benefit of the director. Got BIK and tax inefficiencies written all over it."

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DougScott
By Dougscott
04th Mar 2024 13:26

Ask the "well-known nanny bureau" what "HMRC rules" they are referring to. It's not the first time an agency would have got things wrong!

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By Craigy1874
04th Mar 2024 13:51

There isn't an 'HMRC view', you simply apply the basic tax rules to the situation which is as mentioned above +1, +2 etc.

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By Bobbo
04th Mar 2024 14:04

Who does the nanny's contract of employment state is their employer?

Is it 'Mr Smith' or 'Smith Limited'?

Thanks (3)
Replying to Bobbo:
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By Justin Bryant
05th Mar 2024 08:58

Why can't any company (e.g. Goldman Sachs) hire a full-time window cleaner or whatever (e.g. masseur) for the benefit of its employees (for cleaning the windows of the employees' homes or massaging them etc.) and have them on its payroll for that business purpose (being an employee benefit)? It's no different here for a nanny.

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Replying to Justin Bryant:
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By Bobbo
05th Mar 2024 13:28

My point was simply that the parent entering into an employment contract with the nanny and then using their power as a director to include that nanny on the company's payroll is not exactly the same thing as the company entering into an employment contract with the nanny and including said nanny on its own payroll.

Arguably the former constitutes settling a pecuniary liability of the director, rather than, in the case of the latter, providing a benefit in kind. Though I have no idea whether this is a point HMRC would pursue.

Thanks (1)
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By SXGuy
04th Mar 2024 14:20

Probably having trouble finding it because it's bullcrap.

It's clearly a bik on the parents, but nothing to stop them doing it.

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By ireallyshouldknowthisbut
04th Mar 2024 14:25

I find "if you dont put it on your P11D its fraud - we dont work for fradusters" type approach works a treat.

Thanks (1)
RLI
By lionofludesch
04th Mar 2024 15:34

The PA tasks are a red herring. If it's 90% nanny work, 90% of the cost is a bik.

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Replying to lionofludesch:
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By Tax Dragon
04th Mar 2024 21:37

I'd bold and underline your word "cost". It's not just the nanny's salary that's taxable as employment income of the company director - it's the cost of employing the nanny (which of course includes that salary).

Thanks (1)
Replying to Tax Dragon:
RLI
By lionofludesch
04th Mar 2024 22:11

Tax Dragon wrote:

I'd bold and underline your word "cost". It's not just the nanny's salary that's taxable as employment income of the company director - it's the cost of employing the nanny (which of course includes that salary).

That's very kind. I'd also add the possibility that any biks that the nanny gets as part of her salary package might well be included in that cost.

Thanks (1)
A Putey FACA
By Arthur Putey
04th Mar 2024 17:46

Probably a result of living in a Nanny State.

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By DKB-Sheffield
04th Mar 2024 20:44

I can't see anything particularly illegal with paying the nanny through the company payroll (assuming the relevant employee taxes and benefits are squared up etc.).

I can foresee other legal (potentially illegal) implications of doing so - along the lines of H&S, EL etc.

It's likely a risk to the company if adequate insurance, RAs, etc. are not in place - but then, that's not a tax question, nor an accounting question, so not one I could/ would answer.

Thanks (1)
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By paul.benny
05th Mar 2024 07:13

I have a some sympathy with the OP here. Having insisted to Client their actions are unlawful, OP has been told by all here that paying nanny through company is not actually illegal, simply Not A Good Idea.

Thanks (1)
Replying to paul.benny:
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By FactChecker
05th Mar 2024 12:18

Indeed, but we (or at least I) cannot produce citations of which we are unaware even after a search - and that may not exist.

OP's best chance would be to revert to the "well know nanny tax bureau" who've been quoted and ask them for a citation or at least an explanation of what seems a poorly worded quote - as in what are the relevant "normal nanny payroll rules"?

And IMHO it may be a salutary lesson to avoid categoric statements to clients that you *cannot* do something (except of course where there is indeed legislation to prevent the action), rather than explaining why it might be unwise (impacts, etc).

Thanks (3)
Replying to FactChecker:
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By Tax Dragon
05th Mar 2024 12:36

I hadn't actually taken in the bureau quote. Doesn't it just mean that employer A (the company) shouldn't [maybe even "can't" - this is more your area of knowledge than mine] include employer B's staff on its payroll? Employer B (in this case the parent/director) should ["must"?] operate its own payroll.

I don't read it as meaning that employer A can't employ the nanny.

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Replying to Tax Dragon:
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By FactChecker
05th Mar 2024 13:24

TBH I can't work out what the bureau quote is trying to say (as a result of the dreaded "they may not" usage) ... which is why I recommended OP asks them, given that the quote seems to be the sole 'source' for OP's position with client.

In very general terms, not meant to be specific to this case, you are of course correct that there's no reason why "employer A can't employ the nanny" - or at least none to do with the question here (usual rules apply with regard to 'right to work in the UK' and DBS and so on).
And in similar terms, I can't see any inherent reason why "employer A .. shouldn't or can't .. include employer B's staff on its payroll" - a frequent occurrence now that people often have a portfolio of employments.

Thanks (3)
Replying to paul.benny:
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By More unearned luck
05th Mar 2024 13:10

Um, KRW accountants are saying it (ie the employer being the company) is a Good Idea and respondents aren't necessarily gainsaying that.

In addition to possible tax savings there are admin savings, no separate: payroll, pension scheme or employer liability ins needed and it will be the company that gets stuffed with any NMW penalties.

Employment allowance might be a disincentive or an incentive (if the director is the only 'employee' at the moment).

Anyway it seems a better plan than paying nanny via deed of covenant.

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Replying to More unearned luck:
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By Justin Bryant
05th Mar 2024 13:29

Yes; I'm equally bemused as to why everyone (except you & me it seems) thinks it's not a good idea (let alone not illegal).

Seems like a no-brainer in fact.

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Replying to Justin Bryant:
RLI
By lionofludesch
05th Mar 2024 13:36

Justin Bryant wrote:

Yes; I'm equally bemused as to why everyone (except you & me it seems) thinks it's not a good idea (let alone not illegal).

Seems like a no-brainer in fact.

I'm not saying it's a bad idea. I'm saying the OP needs to understand the consequences of the benefit on the director.

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By sammywitters
06th Mar 2024 10:22

Thank you everybody for your responses.
The statement by the nanny bureau saying you can't put the nanny on the payroll really threw me off, so I felt the need to investigate to make sure there wasn't a huge issue with it and HMRC hadn't introduced some law. The Nanny Bureau have declined to comment further when I asked them to comment about the statement on their website.

The fact that I would prefer the nanny not to be on the payroll as it's a real pain is neither here nor there!

Thanks again!

Thanks (1)
Replying to sammywitters:
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By Justin Bryant
06th Mar 2024 11:31

NB if the company instead pays the Nanny Bureau (who then pay the nanny), then the tax treatment is per para 76 here and there's no EE NIC saving.
https://caselaw.nationalarchives.gov.uk/ukftt/tc/2024/179
https://www.accountingweb.co.uk/tax/business-tax/charitable-chairman-cau...

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Replying to Justin Bryant:
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By Justin Bryant
06th Mar 2024 12:28

I should have made clear that if the company contracts with the Nanny Bureau EE NIC is also avoided. See here similarly re school fees:
https://www.taxinsider.co.uk/using-the-business-to-pay-school-or-univers...,)%20on%20the%20employee%2Fchild.

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