Until last Wednesday, parents using the services of a nanny via a limited company structure were able to avoid paying employers' and employees'
national insurance contributions and income tax on the nanny's salary. The scheme, which required the nanny to become a director of the limited company and pay tax on a self-assessment basis, enabled some parents to save as much as 8,000 a year, but it affected such employment rights as protection against unfair dismissal.
Stephen Vahrman, managing director of payroll service Nannytax, welcomed the move. He said, 'These arrangements were never a suitable vehicle for the employer-employee relationship between parents and nannies and their use could potentially have ended in serious disputes. But because of the cost savings involved, some parents were pressuring their nannies into using them, whether they were happy to or not. We think it's good for the working relationship that they have now been closed.'
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