Any questions? My local authority is telling me to treat my carer as self-employed. Is this correct?
We regularly receive queries via our website. We do not give advice, but we try to signpost sources of further information and support. Some of the replies might be useful to others, so occasionally we will post them anonymously as ‘question and answer’ news items. We have received a question recently on what to do if your direct payments provider tells you that you must treat your carer as self-employed.
Please note – this is posted as a ‘news’ item, which means the information and links are not reviewed and updated. You should not rely on it without checking the full facts of your case with HMRC or a tax adviser.
Question: Due to my health and disability, I have been advised by my local authority to employ a private carer of my choice. They only approve carers registered with HMRC as self employed. I’m unsure what to do about registering as an employer/paying their taxes etc.
In the unusual event that your carer is genuinely self-employed, then they would be responsible for paying their own tax and National Insurance to HMRC. As such, you would not need to register as an employer with HMRC and set up a Pay As You Earn (PAYE) scheme. Although it is possible for carers to be genuinely self-employed, because of the nature of the role, in our experience most carers are likely to be employees rather than self-employed.
It is your (the person taking on the carer) legal responsibility to work out the employment status of anyone you take on (i.e. whether they are employed or self-employed). There is more information on this in our specialist tax status section.
The most important point to understand is that a person taking someone on cannot just ‘decide’ that they prefer one status over the other, because, for example, it is easier for them or saves them money. It is a question of fact based on the circumstances of the arrangement, not choice. This also applies where the money is provided by a third party, such as a Local Authority – it is not possible to say all carers must be self-employed or all carers must be employed, the person taking on the carer must consider the circumstances of each arrangement and follow the HMRC guidance. Getting this status wrong can mean the person taking on the carer can face penalties from HMRC.
If the person that you are taking on is an 'employee' for tax purposes then you will most likely need to register as an employer with HMRC for the purposes of operating PAYE. The PAYE regime requires tax and National Insurance to be deducted from most payments made by employers to employees.
You can find more information on registering with HMRC, including the situations where you don’t need to register, and other aspects of being an employer on our website. We suggest you start with our helpful first steps guide ‘Taking on a personal assistant – a basic guide’. Taking someone on that is an employee is probably more expensive than taking someone on who is self-employed, but the Local Authority should build in any ‘extra’ costs into the money they give you.
Through our work in this area, we have found that there is generally a poor understanding of status issues by those administering government funding to people through schemes such as direct payments.
In the first instance, we recommend that you go back to your Local Authority (or whoever is providing the funding) and point them to our website guidance pages (with links to HMRC guidance) which explains the steps that need to be taken to help determine if a carer is an employee or self-employed. If they still continue to insist that any carer taken on is self-employed (and you have doubt about that status), then please do come back to us.
Whilst we can’t necessarily get involved or offer representation we might be able to point you in the right direction to further guidance and support.