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

Agency Staff
Practicability of PAYE
Care workers who claim to be self-employed
Care worker is related to the person being cared for 


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.

One source of funding is by virtue of The Community Care (Direct Payments) Act 1996. This enables local authorities to make direct cash payments to individuals who are assessed as being in need of care. This, in turn, enables people who need care to arrange and pay for the relevant care services themselves. Another source of funding is the Independent Living Fund which is a Government financed charitable trust set up to give financial assistance to disabled people to enable them to live independently.

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 funding recipients engage a carer themselves (see ‘Note’ below) or a relative arranges this on their behalf

  • Create a P employer record for the person being cared for

Before setting up an employer record you must always check that

  • A PAYE scheme is appropriate
  • An employer record is not already in existence

Where the person being cared for is the PAYE employer you must 

  • Deal with them in a helpful and tactful way
  • Explain the help available from Business Support Teams and how to contact them

Local Authorities or the Independent Living Fund may give advice regarding PAYE obligations to funding recipients.

Where they are unable to personally operate PAYE

  • Explore the possibility of someone operating PAYE on their behalf (see 'Practicability of PAYE' below)

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

  • Bring the care worker into Self Assessment (unless they are already in SA, when no further action is required). Remember that the person requiring the care remains responsible for calculating and paying over Class 1 NICs to HMRC (see ‘Practicability of PAYE’ below)

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 Status Inspector.

Practicability of PAYE

Where it is not practicable for PAYE to be operated by the person being cared for or someone on their behalf

  • Do not use a DPNI scheme where the carer operates PAYE and NIC on their own pay

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.

Care workers who claim to be self-employed

Where someone engaging a care worker seeks guidance from you because the care worker claims to be self employed

  • Issue leaflet IR56 (Employed or self employed? - a guide for tax and national insurance)

If you are asked for advice or an opinion on the status of the care worker

  • Refer the matter to the Status Inspector

Care worker is related to the person being cared for

If a carer is employed by their spouse or a close relative in a private dwelling-house in which both the person employed as the carer and the person being cared for reside, any payments made to the carer are not liable to NIC deductions. PAYE is deducted as normal. The Employment Status Manual at ESM4015 provides more detailed information.

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

It is important that no other scheme types are allocated to the employer record.