Limited benefit

Another effect of having a nanny register would be to make parents employing nannies eligible to claim tax credits, far beyond the narrow 'home childcarer' definition that many parents are now struggling with as they fill in their new tax claim forms. Being subsidised in this way might make parents feel more generous towards their nannies when payday comes. It would certainly be a fairer business than the convoluted scheme that a growing number of accountants are trying to sell to parents. The idea is that a nanny sets herself up as a limited company and then charges the parents for her services, escaping employer's and employee's national insurance and tax contributions. However, Stephen Vahrman of the payroll service Nannytax advises against this. Not only will the nanny have hardly any national insurance contributions or payslips to show for herself, which will be needed for her future finances (not to mention maternity and sickness benefits); but there is no obligation on the parents to pass their savings on to the nanny. They might keep the whole gain to themselves. But the crunch will come when the Inland Revenue decides whether the minimum wage law applies to such an arrangement.