Sara Graff

Taxing Nannies

1. My nanny is pregnant – what do I need to do and what are the implications?

Provided your nanny was not pregnant when she started working for you, she will be entitled to maternity pay (SMP) for up to 39 weeks. You will be required to pay this through the nanny payroll, but the amount can be claimed in advance from HMRC.  Your nanny will need to obtain a MAT B1 from her doctor, which is issued after 20 weeks of pregnancy.

SMP is payable at the rate of 90% of the gross for the first six weeks and at a lower rate (£128.73 for 2011/12, £135.45 for 2012/13) for the following 33 weeks and this will be subject to nanny tax deductions in the normal way.

Your nanny must not be subject to detrimental treatment for being pregnant.  She is entitled to reasonable paid time off to attend pregnancy related medical examinations within working hours and for parent or relaxation classes.

2.  How much maternity leave do I have go give my nanny and does she have the right to return to work?

Your nanny will be entitled to 52 weeks maternity leave regardless of whether she qualifies for SMP.  She can start her maternity leave at any time from the start of the 11^th week before the week the baby is due and she must notify you on or before the 15^th week before the baby is due.  She can vary the date on which she intends to start her maternity leave provided that she gives you notice of the new date 28 days before the date originally notified.

You must write to her within 28 days of her notifying you when she intends to take her leave, stating her expected date of return at the end of her maternity period.

Your nanny does not need to give you notice of her return if she intends to return at the end of the period of maternity leave.  However, if she wishes to return at an earlier date then she must give at least 8 weeks notice of when she wishes to return.  If she does not wish to return to work at all she must give you the greater of notice per her contract or statutory notice.

Your nanny is entitled to return to work at the end of her maternity leave period on the same terms and conditions as before.  This means that a request to bring her baby to work can be refused.  However, she does have the right to request part-time or flexible working and this has to be given consideration but can be rejected on substantial grounds.

3. What happens about holiday entitlement when my nanny is on maternity leave?

Your nanny’s holiday entitlement will continue throughout maternity leave, but any holiday entitlement not taken by the time maternity leave commences will be lost unless she returns to work in the same “holiday year”. When she either returns to work or formally leaves your employment any remaining holiday due will be calculated by reference to the number of days accrued in the current “holiday year”.

“Parents face tax bill over nannies”

In nearly all circumstances it is a legal requirement for nannies to be paid through the PAYE system and employees need to be declared to HMRC if their earnings are more than £107 per week (regardless of whether tax is payable at that level).  There are very rare circumstances when nannies can be correctly treated as being self-employed.

It is not totally clear how HMRC will tackle this issue at present but they have advised that when a nanny starts a new job it often becomes evident that there is a gap when deductions of PAYE and NI have not been made and they will therefore investigate such cases with more rigour.

In 2013, Real Time Information, (RTI), is being introduced, whereby each time an employee is paid, the relevant nanny PAYE and National Insurance information will be sent directly to HMRC rather than just submitting a form P35 at the end of the financial year.  Also, employees will need to be registered with HMRC even if their earnings are below the lower earnings level for national insurance of £107 per week.  This is to make it easier to implement Universal Credits from October 2013, as HMRC will require up to date payroll information to process any benefits.  HMRC will therefore have much more information available to tackle tax avoidance.

If an employer is caught evading PAYE for their nanny, the new regime will mean that they will need to repay all the underdeclared tax and national insurance and in addition will have to pay a 100% fine in addition to the current penalty regime for late payment and filing of returns.  Employers who as professionals should be aware of the rules, such as accountants and lawyers, could also be prosecuted.  Taking the stance that a nanny is self-employed is unlikely to be a defence and HMRC will look to collect the additional PAYE and NI from the employer rather than the nanny.

Are you concerned about what you have just read above? If so, please feel free to contact Taxing Nannies and have a confidential chat.  We can help you get your nanny payroll affairs sorted out and backdate where required.  We offer a highly professional service and we will deal with your affairs in a pragmatic, sympathetic manner.

We would suggest that this is done as soon as possible to mitigate any penalties or interest for late payments.

Let Taxing Nannies sort out your nanny payroll NOW before HMRC do it for you!

You can contact us on 020 8882 6847 or post@taxingnannies.co.uk

Hope you find these useful.

Sara Graff

http://www.taxingnannies.co.uk

1. Can my nanny be self employed?

Generally where a parent wishes to use the services of a nanny for specific dates and times and specifies the terms and conditions then this will be considered to be employment and a nanny payroll will be required and PAYE and national insurance deductions made.  Occasionally, if a nanny has several jobs and there is flexibility of hours then there may be a case for self employment.  Maternity nurses on the other hand tend to be self employed as they dictate their terms and conditions of employment.

2. What is the difference between employment and self employment?

A self employed nanny must invoice for her services, she is not entitled to any holiday pay or sick pay or maternity pay if she becomes pregnant.  No notice needs to be given to terminate the contract on either side.  The nanny needs to register as self employed and submit tax returns recording her income and any expenses and pay self employed class 2 and class 4 national insurance contributions in addition to income tax.  However, self employed national contributions do not confer the same rights as Class 1 employed national insurance contributions, in respect of benefits or pension entitlements.

3. What happens if my nanny does not account for her earnings as self employed or HM Revenue & Customs deem her not to be self employed?

HM Revenue & Customs will generally come after the employer for nanny tax as if the nanny had been employed thoughout, and it will then be for the employer to try and recoup some or all of that liability from the nanny.

4. Do I have to register as an employer if my nanny earns less than the single person’s allowance?

If your nanny only has the one job then there will be no nanny payroll deductions until he/she earns £136 per week when payroll deductions start to become payable.  However, if your nanny earns more than £102 per week (£107 from April 2012) she will be entitled to benefits and pension payments as if she paid national insurance and there is a legal requirement to register as an employer and provide your nanny with regular payslips.  If your nanny has another job, then you will normally be required to register as an employer, regardless of the level of income, as the personal allowance will normally not cover income from both employments.

5. What happens if my nanny gets another job?

A nanny is entitled to a single persons allowance (£7,475 per annum rising to £8,015 in 2012/13).  HM Revenue & Customs will normally try and give the allowance by way of tax code to one of the employments whilst giving a “BR” code to the other, which can result in one employer being unfairly penalised when net salaries are being paid to the nanny.  We normally suggest splitting the allowance between the two employments in proportion to the salaries earned in each job to ensure an equitable split of nanny PAYE between the employments and we can organise this even if only one employer is a client.

How Taxing Nannies can help you avoid late payments to HRMC

From 6 April 2012, HMRC have greater powers to help ensure that employers pay their PAYE tax deductions or Class 1 National Insurance contributions (NICs). The new powers will allow HMRC to obtain a security from employers where there is a serious revenue risk as a result of non-payment of employees’ income tax and NICs.

The new powers are drafted to target employers who deliberately try to defraud the national purse but the changes will also target businesses that build up large debts to HMRC as well as those who do not respond to HMRC’s attempts to contact them in reasonable time.

The required security will, according to HMRC, usually be a cash deposit from the business or director – held by HMRC or paid into a joint HMRC/taxpayer bank account – or a bond from an approved financial institution which is payable on demand. The amount of security required will be calculated on a case by case basis. Businesses required to pay a security deposit will have the option to appeal any decision by HMRC.

In a separate announcement, the head of debt management and enforcement for HMRC has warned that anyone making late payments to HM Revenue & Customs will be pursued until the Revenue receives its share.

Dr Abani told a delegation of accountants that people making late PAYE payments will receive letters from HMRC with penalty notices attached. ‘If you have been making late payments on PAYE there will be envelopes landing with penalties,’ he said. He reiterated the message that those who fail to inform HMRC of problems would not be afforded leniency: ‘If you have not spoken to us in time we will not remove late payment surcharges… It is very important to tell HMRC what has gone wrong’, he said.

Businesses that hare having genuine financial difficulties should contact HMRC at the earliest opportunity to discuss the options available to them.

Taxing Nannies assist our clients so that they do not end up with arrears, as follows:

1. We advise all our clients at the outset as to the likely costs of nanny tax and national insurance and how much the employer should reserve on a weekly or monthly basis in addition to the net salary paid. This is particularly important where the employer agrees a net salary with the nanny, but does not realise the additional costs of nanny PAYE, employees and employers national insurance. Even where an employer agrees a gross salary with the nanny, Taxing Nannies will advise of the additional employers national insurance which is payable.

2. Where we are advised of a change in salary, we inform our clients of the revised liabilities to tax and national insurance.

3. Where our clients enter into nanny share arrangements, Taxing Nannies assists its clients with splitting tax codes so that payment of nanny taxes by both employers is equitable. Where there is a change of arrangement Taxing Nannies will recalculate the liabilities and advise our clients accordingly.

4. Once a quarter we write to all our clients advising them of the exact amount of their nanny taxes with details of all the different payment methods and due date for payment. We give ample notice and remind our clients of payment dates for PAYE and national insurance.

5. If our clients receive demands for tax, penalties or underpayment notices from HMRC, Taxing Nannies will check the validity of those notices and advise our clients accordingly. Nat all notices sent by HRMC are correct! If a client is unsure as to what nanny taxes have been made, Taxing Nannies have the facility to check details of payments made with HMRC.

6. Where our clients express difficulty in paying HMRC, we will advise them as to their best cause of action.

For more help and assistance with all you nanny tax and nanny PAYE needs, contact us and we will be happy to help. info@taxingnannies.co.uk

Sara Graff of Taxing Nannies

Sara Graff runs a successful nanny tax and nanny PAYE company in North East London as well as running Sara Graff and Co, an accountancy company offering tax advice and services to businesses across the UK.

What you need to know about nanny redundancy from Taxing Nannies

By their very nature, nannies will normally have a finite life with a family.  Sometimes parents give up work to look after the children, the family may move to another area or children are enrolled into a nursery or start full time school. Inevitably children grow up and there will always come a time when a nanny will no longer be required.

Employers do not always realise that when a family no longer require a nanny, for whatever reason, and the nanny does not give notice of her own accord, then this is a redundancy situation.  Also where the employer wishes to significantly vary the terms and conditions of employment of a nanny, for example from full time to term time, from live out to live in and visa versa, and the nanny does not wish to accept, then this may also be deemed to be redundancy.

When such as situation occurs the employer should always consult with the nanny. This will normally involve:

• speaking to the nanny directly about why you wish to make her redundant
• looking at any alternatives to redundancy (if any other positions exist such as housekeeper.)  Positions must be suitable employment.

If this doesn’t happen, the dismissal may be deemed unfair.  Decisions to make a nanny redundant should always be confirmed in writing.

If there is an alternative job, the nanny has a right to try out the job for a trial period of 4 weeks before deciding whether or not to take it.  The trial period will start immediately after the previous job ends.  If the nanny decides the new job is not suitable, she can give notice during the trial period without affecting any right to redundancy pay. If she does not given notice by the end of the trial period, her right to redundancy pay ends.

When an employee is made redundant and has been employed for two years or more at the date the notice period ends then they are entitled to statutory redundancy pay as follows:

0.5 week’s salary for every year worked aged 18-21

One week’s salary for every year worked aged 22-40

One and a half week’s salary for every year worked from aged 41

From 1^st February 2011 the statutory redundancy cap (ie the maximum weekly pay that is required to be made) £400 gross.  Redundancy pay is tax free for payments of less than £30,000.  An employer can pay more than the statutory redundancy cap if they so wish, provided that it is reasonable within the context of the salary and job performed.

An employee must be given:

• one week’s notice if the nanny has been employed for at least one month but less than two years
• if the nanny has been employed for at least two years, one week for each complete year of employment, up to a maximum of twelve weeks.

The contract of employment may give more notice than this but it cannot give less. The employer should check the contract to see how much notice they are required to give.

If the nanny has been given notice of redundancy, they have the right to paid time off to look for a new job provided that, by the time the notice period ends, they have worked for the employer for at least two years.

The employer only has to pay up to two-fifths of a week’s pay for time taken off to look for another job during the whole of the notice period. This means for a normal five-day week, the nanny will only be entitled to be paid for two days, however many days she actually takes off.

A nanny can be made redundant when she is pregnant, although the employer will need to be able to demonstrate that the redundancy is nothing to do with the pregnancy.  Depending on when the redundancy occurs, the employer may still be required to administer statutory maternity pay even after the employment has been terminated.

Taxing Nannies regularly calculates redundancy payments and assists employers to ensure they comply with their statutory requirements. Contact us for all your nanny tax, nanny PAYE and nanny payroll advice: info@taxingnannies.co.uk or +44 (0)208 888 6847.

Beware Fraudulent Emails from HMRC

Please be aware of fraudulent emails purporting to be from HMRC. The fraudulent emails usually inform recipients that they are due a tax rebate and provide a click-through link to a replica of the HMRC website.

These are not genuine HMRC messages and should be disregarded. It is part of a ‘phishing’ exercise that uses bogus e-mails and websites to trick taxpayers into supplying confidential or personal information. The ‘phishing’ emails are being sent from inside the UK and around the world. The emails often start with phrases which alert taxpayers to the fact that they are due a refund of tax.

Phishing is one way that cybercriminals can use your details to create false bank accounts, tax accounts, loans and credit card applications. This is a growing problem for anyone using online reporting facilities and we all need to be vigilant.

In a recent press release HMRC have stated that ‘We currently only ever contact customers who are due a tax refund in writing by post. We don’t use telephone calls, emails or external companies in these circumstances. If anyone receives an email claiming to be from HMRC, please send it to phishing@hmrc.gsi.gov.uk before deleting it permanently’.

If you are unsure as to the authenticity of any email purporting to be from HMRC you should avoid clicking on any links until satisfied that the email is legitimate.  You may always contact us at Taxing Nannies at if you are unsure as to the legitimacy of an email.

Contact us for more information at post@taxingnannies or call us on 020 8882 6847.

Underpayment/Overpayment and PAYE Notices – Help From Taxing Nannies

HMRC is currently sending out tax calculations to some taxpayers using the P800 form. The form shows HMRC’s tax calculations in respect of the tax year ending 5 April 2011. This form is sent to taxpayers after HMRC have received details of the salary, pension and tax paid for each individual from employers and pension providers. HMRC use this information to see if the correct amount of tax has been paid.

In most cases, taxpayers that pay tax through the PAYE system will have paid the correct amount of tax. However, if too much or too little tax has been paid taxpayers will be sent a P800 form. HMRC are currently sending out P800 forms to taxpayers due a refund for the last tax year i.e. those who have paid too much tax and HMRC will automatically send a cheque within 14 working days of the date on the P800 Tax Calculation.

HMRC will send P800 forms later in the year to taxpayers that have paid too little tax. HMRC will usually collect any underpayment of less than £3,000 in 12 monthly instalments beginning in April 2012. Taxpayers who receive a P800 form should ensure that the figures quoted are correct.

Taxing Nannies would be happy to assist with employers whose nannies receive underpayment notices and who are concerned that they may not be correct.

A recent tribunal hearing considered an appeal by a taxpayer who had sold his business back in July 2008. Upon the sale of his business the taxpayer paid his employees and issued them with P45 forms. As the business had ceased on 28 July 2008 an employer’s annual return should have been submitted to HMRC by 19 May 2009. The taxpayer was not aware of this fact and did not make any such return. In May 2010, almost two years after his business ceased HMRC issued a fixed penalty notice of £800 to the taxpayer for the failure to file an annual return.

The taxpayer appealed the penalty charge arguing that he had a reasonable excuse for the non-submission. The taxpayer explained to the tribunal that he had spoken to HMRC to inform them that he was no longer going to be in business and requested HMRC’s advice as to what actions he needed to take. The taxpayer was advised to write to HMRC, which he did, but was not informed of a requirement to file an annual return. HMRC were unable to prove to the tribunal that the filing notice had been sent to the taxpayer’s new address.

As has been frequently mentioned in recent tribunal cases, a reasonable excuse may involve an exceptional event but need not necessarily do so. The tribunal accepted that the taxpayer had a reasonable excuse that ‘was primarily caused by the appellant being given either misleading or incomplete information which led him reasonably to believe that he had done all that he was required to do upon closing or selling his business’. The taxpayer’s appeal was allowed.

Taxing Nannies have a good record of dealing with appeals. If you as an employer have received a penalty notice and are not sure whether it is due, Taxing Nannies will be pleased to assist you with any appeal required. Taxing Nannies would also be happy to assist with employers whose nannies receive underpayment notices and who are concerned that they may not be correct.

Call us now on 020 8882 6847 or email post@taxingnannies.com

National Minimum Wage Updates from Taxing Nannies

The national minimum wage rate increased from 1st October 2011 to £6.08 per hour for employees aged 21 and over (previously £5.93), £4.98 for employees aged 18-20 (previously £4.92) and £3.68 for workers aged 16-17 (previously £3.64). The daily accommodation offset rate will increase to £4.73 for each day worked (previously £4.61).

Although au pairs and domestic workers living with a family can be exempted from the minimum wage requirements this is only when they live as part of the family sharing in tasks and leisure activities on the same basis as the family. Therefore most live in nannies are not exempted from the national minimum wage requirements in which case the minimum employers need to pay are the rates stated above less the accommodation offset.

Nanny Tax and Nanny PAYE are easy with Taxing Nannies

Employing a nanny brings with it the same obligations as any business taking on an employee. By law, therefore, an employer must account for Income Tax and National Insurance Contributions on the salary paid to a nanny or mothers help, whether they are full time, part time or temporary. A nanny’s salary is normally quoted net of deductions (i.e. the amount she wishes to receive in her hand), and it is therefore the employers responsibility to pay over to PAYE, Employees National Insurance and Employers National Insurance to HM Revenue & Customs in addition to the net salary paid to the nanny. Expenses paid in benefits provided on behalf of a nanny in addition to her salary may be liable to a separate charge to Tax and National Insurance.

Remember that avoiding the taxman is illegal. If HMRC catches up with an employer who has failed to declare their nanny for tax purposes or has tried to maintain that she is self-employed, then they will be liable to pay the correct Tax and National Insurance Contributions and interest and penalties. There is no legal right to seek repayment from the nanny. Nanny Tax and Payroll services like Taxing Nannies, can really make it easy for you. We help our clients by taking away the stress of calculating the tax payable on your nanny’s salary and providing payslips, as well as lots of tips and facts and we file your nanny tax return. This makes the whole process simple and leaves you free to manage your childcare arrangements, knowing your nanny is being paid correctly and so is your tax!

Our service is easy to subscribe to. Contact post@taxingnannies.com or visit our website for more information.