Hairdressers Rent a Chair Query

Hairdressers Rent a Chair Query

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We have a client who is a hairdresser trading through a limited company. He owns a salon and rents chairs to a number of self employed hairdressers. The majority of the income for the company and the self employed hairdressers is received from debit/credit cards, which due to the client owning the salon is paid directly into the limited company bank account and then paid to the self employed hairdressers.

We are under the impression that VAT will only be due on the clients income and not the total takings through the PDQ machine, however, if more money is taken thorugh the PDQ machine than actually earned by our client is this going to cause our client problems regarding VAT?

James Hewitt

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By AnonymousUser
17th Apr 2008 09:01

Quite common James.
Obviously with hairdressers but also within the taxi industry. The individual operatives are not registered for VAT (which keeps charge to Joe Public low) but they use/buy the shared resources of the salon owner. Record keeping needs to be good but this is rarely an issue as the operatives want what's due to them. I would advise a seperate bank account and produce a self-billed invoice (subject to HMRC agreement) each week that shows clearly gross income and deductions.

The whole scheme only works if the customer belongs to the operative and not the provider. In the taxi industry regular account work therefore belongs to the firm and is vatable. This can be an issue with hairdressers but usually the self-employed stylists have their own client lists / regular bookings which they are free to take with them if they leave. In my opinion only senior stylists could pass the necessary tests of control etc.

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By james avant-garde
16th Apr 2008 16:51

Further info
The contractors are paid from the limited company account, however, the contractors are not going to be VAT registered and therefore if the limited company has to show the gross income for VAT purposes then the payments to the contractors will not have a VAT element.

The till is operated by software which clearly breaksdown who has earned what income so this can be seperated easily for payment to the contractors.

Any further comments?????

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By User deleted
16th Apr 2008 11:22

surely...
the sales due to the subcontractors are repaid from the same account.

in this case the sales for VAT will be the gross received less whats been recharged.

might also be a deduction for a contribution to pdq charges?

is it not possible to have each person working in the salon having there own code on the till so each persons sales are recorded seperatley.

you can then take sales from the till receipts.

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