IR35 and Benefits in Kind

Nanny paid from my "net" IR35 salary is attracting further tax as a benefit in kind!

Following a PAYE review the other week, I have been issued with rather a large demand for a benefit in kind I never declared - as I didn't realise it was one!

I have 4 children and 5 Years ago my accountant advised me to pay our nanny through my LtdCo. He never declared this on the P11d. For the last 4 years that I've been doing the payroll, I've been paying IR35 (am I the only one ..?) on all my company income. The nanny was still being paid by the LtdCo. Although I realised this was not tax effecient, I genuinely thought it best for the nanny and the revenue, in that they both get their tax paid.

However, now the IR have said I should have declared the nanny's income on my P11d. I tried to argue that she was paid out of my "net" salary and that the company hadn't received any benefit as I've been making a loss on the accounts for the last 5 years, due to IR35. Let's face it, if I had transferred her gross salary to my personal account and paid her gross, everything would have been fine - except that she may not have paid her own tax in full!

Can anyone offer any help or advice, I'm desperate !!! I feel as though I'm on the moral high ground on this one, but cannot get the point across. Furthermore, any suggestions for what sort of (paid for) help I'd need next.

Many thanks,

Granville

-- gdanby