Being Self Employed

hmrc_self_assessment_tax_return

Nannies and Self Employment.

We are always getting asked if nannies can be self employed, It can seem like a good idea to a family as they can avoid the hassle of registering wth HMRC but sometimes it is not as beneficial as it first seems.
It is vital that a nanny and a parent are absolutely clear on the status of employment agreed between them before embarking on a working relationship.
Here is some information to help you.

These are some of the most common questions we have been asked. If the responses are mostly yes then the likelihood is that you can be self employed.

  1. Do you split your week up and work for a three or more people/companies?
  2. Can you have the final decision in the places that you work and the hours that you do each day?
  3. Are you in a position to choose what work to do and when?
  4. Are you given  for expenses such as food and petrol or are you expected to cover these costs yourself?
  5. Are you given a set rate for the work agreed or paid hourly?
  6. Do you have people that can cover you if you are unable to work that day?

 However if you answer yes to these questions below then you are most likely to be employed.

  1. Do you do the work yourself and cannot delegate to a third party?
  2. Does your “employer” have the final say in the decisions made?
  3. Are you bound by a contract with your “employer” and are they also bound to offer set hours
  4. Is your salary recieved as a whole on a set day each month?
  5. Can you be paid overtime for extra work undertaken?

The HMRC will take into consideration all aspects of your work and the general consensus is that nannies who work for just one family cannot be self-employed and even if working for two families in a split week it would be quite unusual for a nanny to be self-employed.
For example, a nanny would need to be working for various different people (three or more), at irregular times and days. If the hours are more regular then it is far less likely they will be self-employed.

If a nanny works for many families in the capacity of maternity nursing or night nannying or even as a career temping in short term temping roles … then they can in theory be self-employed but HMRC will need evidence that this was genuinely the case.

If a nanny is “employed”, the task of paying tax and national insurance contributions falls on the Family as the nanny’s employer. Failure to pay these can lead to severly heavy financial penalties.

Are there Benefits of being an employer for a Family?
The short answer is “No” however by being an employer you are protecting yourself from potential financial penalties mentioned below and even worse,  a possible criminal record. This does not seem like a hard decision to us.

If a nanny is employed they will enjoy the following benefits. However if a nanny is self-employed, then absolutely none of the listed benefits apply to them.

  1. SSP 
  2. SMP
  3. Holiday pay/annual leave
  4. A right to a regular set salary
  5. A right to state pension
  6. Protection for unfair dismissal
  7. and many more

More information can be found on the government website

HMRC has said that if it thinks parents have been deliberately evading tax then they not only will have to pay the tax due, but could also face a fine equivalent to 100% of the tax due – effectively doubling the amount paid. If parents have been part-paying tax and adding a cash sum on top, this is likely to indicate that they were aware of the rules, and HMRC is unlikely to be lenient. Similarly it has said individuals who officials believe are aware of the rules – such as accountants and barristers – will face criminal prosecution.In addition, any employer employing someone has to take out employer’s liability insurance which protects their employees in the work place should they or their property be damaged. If a nanny is self-employed, it is his / her responsibility to take out and pay for public liability insurance to protect herself in case of an accident. Please note that only once certain amount of NIC has been paid can a parent reclaim statutory sick pay (SSP) or statutory maternity pay (SMP) We work closely with payroll companies that can help you with this.
– Source Parental Choice.