Paying expenses to a Nanny
Many employers of a nanny need to reimburse the nanny certain
expenses she incurs in the course of her duties, for instance
for car travel. PAYE for Nannies is happy to advise clients in
this area as it is important to understand the rules HM Revenue
apply to such payments as travelling expenses to avoid incurring
an unexpected nanny tax charge.
Car Travel
If the nanny uses her own car to take the children on trips or
to nursery etc., this is classed as "Business Use".
Any expenses  for
this would normally be allowable against tax. The simplest way
to deal with such situations is to pay the nanny a "mileage
allowance" of up to 40p per mile (for up to 10,000 miles
per annum) for miles she has travelled on "Business Use".
Such an allowance is non-taxable. However, it should be noted
that the employer must keep a record of all journeys they have
paid the allowance for and must only pay for the actual number
of miles travelled on "Business Use". Any "Round
Sum" allowance of, for example, £20 per week to cover
general unspecified travel does not meet the criteria for non-taxable
expenses and all such payments would attract tax at the nanny's
marginal rate. Employers should also note that any expenses they
pay in relation to the nanny's travel to and from work will also
be wholly taxable.
NB. If the nanny is allowed to use an employer's car,
this car cannot be for the nanny's exclusive use or taken home
by the nanny at night, otherwise it will be classed as a "Company
Car" and taxed as such.
Other Expenses
We would recommend that the where a nanny takes the children out
for trips or on activities., the employer provides only the actual
cost of travel, tickets and food etc. If the employer gives the
nanny a lump sum and cannot account for how this was spent, this
is likely to be regarded as taxable by HM Revenue.
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