Bringing up baby

A couple regularly engage the services of a babysitter, but are unsure of her employment status. Should they be concerned by the introduction of real-time information?
I am a full-time employee for a mid-tier firm of accountants. I have been looking at the real-time information (RTI) rules in order to bring some of my clients up to speed, but my research has given rise to queries about my own personal duties.
Although I am not in business myself, my husband and I regularly engage the services of a babysitter.
Although I suspect that there are some babysitters who are in reality self-employed, I am not entirely convinced that this would be the correct legal analysis, at least in our case, even if that would give us a convenient way out of our obligations under the PAYE code.
Several years back, I raised this with HMRC and was told that we need not worry about PAYE at all as long as the weekly payments were below the Class 1 National Insurance contributions threshold (on a typical weekend we would pay less than half the NI threshold). Consequently, we have paid our babysitters cash in hand with a clear conscience.
With RTI, however, I am less convinced that we can take such a blasé attitude. In the course of my research, however, I am now beginning to wonder whether we should have been completing P38As in previous years.
Surely, PAYE is not meant to be this complex. But there must be some simple way out, which does not amount to turning a blind eye to the rules.
I look forward to reading what readers might suggest. Query 18,132 – Ravi
Reply from David Kirk, author of Employment Status – the Tax Rules
Whether or not a babysitter is self-employed will depend on the facts, and I would suggest that there is a difference between a babysitter who is selected by you as a family friend (likely to be employed) and someone who “does babysitting” (likely to be self-employed).
The traditional employment status tests can be grouped together into three, as a result of the judgment in Ready-Mix Concrete (South-East) Limited v Minister of Pensions and National Insurance (1968 1 All ER 433).
First, does the babysitter have to provide her own service in exchange for pay? Answer yes – she is obliged to remain en poste until you return (even if you are late), and you would not be very pleased if you returned home to find that she had deployed a substitute.
Second, do you control when she works, where she works, what she does and how she goes about it? Answer: yes to when and where, and you would probably expect to have the right to control the other two factors. This would probably be sufficient control to make you the “master”, as the judgment puts it.
Third, is the babysitter in business on her own account? It is here that the distinction comes in.
Someone who is known to be available for babysitting almost certainly is, whereas a friend’s daughter whom you happen to ask to help out one night is probably not.
Your problem is that, if the former is the case, you may well not know about it: unlike the other tests, which rely on the relationship between the two parties, this one is entirely down to the babysitter.
However, I suggest that the case that you need to follow is that of the “Reward” (1818), 2 Dods 265, 165 ER 1482), which enunciated the ancient legal principle of de minimis non curat lex (“the law does not concern itself with trivia”). What are the consequences of making a wrong decision?
First, in view of what is written above, most babysitters are likely to be self-employed, so HMRC are unlikely to challenge this even in cases where there are pointers the other way. (There is nothing on their website or in the Employment Status Manual as far as I know.)
Second, there are unlikely to be many babysitters receiving more than £144 a week, so there will be no National Insurance implications.
Third, even if on a technical basis you should be applying tax code BR, a good many babysitters do not earn the £8,105 a year that is currently necessary to be paying income tax, so they would simply be able to claim back any tax that you paid over.
Filling in a form would, in practice, serve no useful purpose and, considering the work that it would cause HMRC, I do not believe that they would wish you to do it.
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On February 6, 2013, posted in: Articles by