Hi,

I've recently set up my own limited company and wondered if it is possible to employ a nanny through the company to look after my 2 children?  This would seem to bring tax advantages but am I missing something, and are there rules against this? 

I had heard that you are not allowed to employ a nanny on a company payroll (not sure why) but you can employ someone as a 'creche manager' with your home as the workplace creche and your children as the only attendees - does anyone know if this is the way to do it?  (or are neither of these routes worth the hassle!)

Thanks!

Katie

Hi Katie,

Sorry it's taken a while to reply, I have been looking at all your options regarding this scenario!

Unfortunately I think the basic answer is no, your company cannot employ a nanny to look after your children.  I know there is a lot of comments written on forums regarding work place creches but whatever agreements you try to put in place the law will 'see through' them and treat the relationship for what it is - you employing a nanny to look after your children.

Any payments made by the company to the nanny or of PAYE to the Inland Revenue will not be treated as expenses of the company (so will not be deducted from the taxable profit of the company), instead they will be viewed as loans to you which if you are a director may not be legal, and if interest-free will count as a taxable benefit.

There is therfore no potential tax benefit, some additional cost and a whole load of hassle from HMRC. My recommendation is don't do it.

Your most tax-efficient way of taking income from your company is probably via dividends, but if you are not doing that and are taking a salary, particularly if it is taxed at the higher rate, you could consider operating a childcare voucher scheme which could save you some cash plus some NI saving for the company (less a bit for the admin cost). Or if you use a childminder or nursery (but not a nanny) you could pay them directly from the company and achieve the same saving.

You can't employ someone to look after your children and claim that they are your PA or admin. assistant. If you do this you are exposing yourself not only to repaying any tax you have evaded, plus a penalty, but also a criminal charge of fraud. REALLY don't do this.

You could of course set up a genuine workplace nursery although I cannot imagine it would be worth the effort.  In order to avoid a benefit in kind in respect of the provision of childcare by an employer, the following provisions must be met:

1. The child has to be yours or maintained by you at your expense / or resident with you.
2. The premises on which the care is provided are not used wholly or mainly as a private dwelling and any applicable registration is met.
3. Those premises are made availalble by the employeer operating the childcare scheme.
4. The childcare scheme is open to all employees.

Hope this helps! Please get in touch if I can help any more on mary@thehubbusiness.com.

Hi

I had also heard that employing a nanny through a limited company was possible. So it's not legal then?

Can you advise on the most cost-effective, legal, way of having childcare within my own home. I will shortly be resuming a clerical job working from home and have an 8-month-old baby that I need someone to care for while I work. Nursery or childminder is not appropriate, as 1) my baby still breastfeeds during the day and expressing milk is pointless, because he won't take a bottle 2) I don't want want to hand him over to a stranger in a nursery or to a childminder.

I currently operate as a sole trader, but was considering setting up a Ltd company after hearing that employing a nanny through the company might be possible. If employing a nanny in this way is not feasible, is there any benefit to be had from setting up a Ltd company in that case? I provide writing services. I don't know until I start working again, but my pre-tax income will probably be in the region of £20-40k.

I'm not familiar with the taxation system or employment law. I'm just a writer. Please be very patronising and spell out all the implications to me in any reply that you may post!

Thanks,

Pipsqueek

Dear Katie, I'm running my nanny agency, called Stella's Nannies. The answer to your question is: You are able to set up a payroll through a limited company but the salary payments then become a benefit in kind on the director. Therefore you have to decide whether it is tax efficient to do this - and I suggest you discuss the matter with your company accountant. I am uncertain about the "creche manager" approach as this may be considered as a tax avoidance scheme. If you don't have an accountant yet, please feel free to contact us, and we'll put you trough to our nanny payroll service, who will help you out with any questions what you may have. Please feel free to contact us if you would like to find an experienced and/or qualified nanny. We always offer 2 weeks free trial before we invoice for our services, which are highly competitive on the market. Very best wishes, Stella; www.stellasnannies.co.uk

Dear Pipsqueek, I'm running my nanny and au-pair agency, called Stella's Nannies. The answer to your question is: to have someone in your own home - there are 2 options - childminders who are registered to work in your own home or a nanny/mothers help. If you'd like to employ a nanny then you should employ her as an individual and then you would be able to charge any time the nanny did for work in the business to that business, regardless of whether you are a sole trader or limited company. I suggest you discuss the matter with your company accountant. He or She should know the right answer. If you don't have an accountant yet, please feel free to contact us, and we'll put you trough to the director of nanny payroll service, who will help you out with any questions you may have. Please feel free to contact us if you would like to find an experienced and/or qualified nanny. We always offer 2 weeks free trial before we invoice for our services, which are highly competitive on the market. Very best wishes, Stella; www.stellasnannies.co.uk