PAYE23010 - Employer records: employer types: care workers and support employers / direct payments

Overview
Where it is not possible for PAYE to be operated by the person being cared for
Where it is not possible for PAYE to be operated
Agency staff
Is the care worker a spouse of close relative?

Overview

There are an increasing number of people who need a carer to assist them because of a disability or simply getting older. Some of these people receive funding for the provision of care.

Direct cash payments for the person being looked after and more commonly ongoing payments used to employ a care worker or personal assistance to help with their day-to-day needs. These payments are usually an alternative to having the services provided directly by the Council or Trust.

People who receive funding may employ care workers or pay an agency to provide care services. Where they pay an agency to provide care services, they will not normally need to operate PAYE and account for NIC in respect of the carer(s) supplied by the agency. See 'Agency Staff' below.

Where the person being cared for is the PAYE employer you must always deal with them in a helpful and tactful way.

The scheme should be set up in the name of the person being cared for. The only exception to this is if the person being cared for is under 18 years of age or lacks the mental capacity to operate PAYE.  In the case of a child this is likely to be a parent or guardian. For someone lacking capacity it will be a person who the local authority has agreed to be suitable to act on the individual’s behalf.

Do not use a DPNI scheme where the carer operates PAYE and NIC on their own pay, it should be set up as a P scheme type,

The use of a DPNI scheme may disadvantage the carer by affecting their entitlement to the statutory payments, Statutory Sick Pay, Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay and Statutory Parental Bereavement Pay.

Where it is not possible for PAYE to be operated by the person being cared for

A PAYE scheme is required for: -

  • A child

A child should not register as a PAYE employer. Direct Payment Legislation supports this and treats the person who receives the payments as being personally responsible for obligations arising out of its use. This makes them an acting PAYE employer and is usually the parent or guardian of the child. The person who receives the Direct Payments is expected to arrange the care and enter in to an employment contract with the service provider.

  • Caring for more than 1 child

There may be situations where there is more than one child being cared for. For example, a mother looking after two disabled children. In these circumstances it would depend on the funding arrangement as to how many PAYE schemes are needed. If the Direct Payment for each child is received from the same Local Authority, then only one employer PAYE scheme is required to cover both set of funding. If the Direct Payments are received from different Local Authorities, then separate employer PAYE schemes are required for each set of funding.

  • Someone lacking the mental capacity

In these cases, the scheme should be set up in the name of the person receiving the direct payment on behalf of the person being cared for.  This would be someone who the Local Authority has agreed to be suitable to act on the individual’s behalf. 

Where it is not possible for PAYE to be operated

Where you are satisfied that the person being cared for cannot operate PAYE and that arrangements for someone to do it on their behalf cannot be made, the care worker needs to register for Self-Assessment (unless they are already in SA, when no further action is required). The person requiring the care remains responsible for calculating and paying over Class 1 NICs to HMRC

Note: Where the carer provides nursing services follow the guidance in the Employment Status Manual at ESM4251-2.

Agency staff

People who receive funding for the purpose of obtaining care may pay an agency to provide care services. An agency will normally operate PAYE and account for NIC in respect of carers it supplies. Where an agency claims not to be the employer you should seek guidance from the Employer Services Technician.

Is the care worker a spouse or close relative?

For NICs purposes, if someone is employed by a close relative in a private dwelling-house in which both the person employed and the employer reside, disregard it unless the employment is for the purpose of any trade or business being carried out in that private dwelling-house by the employer (see ESM4155 and ESM4156).

When you create a new employer record and the information obtained confirms that the employer and the employee are related, and they both live at the same private house you must

  • Allocate scheme type P to the employer record
  • Use EBS Function AMEND EMPLOYER NOTES to note that NIC is not due