This is similar to a question that I posted a month or two ago, but I now have further information and could use some clarification.
Our client works as a hairdresser/stylist on a self-employed basis, in someone else's salon. All of the takings that she earns are paid directly to the salon, through their till system. The salon then pay 50% of those takings to our client via BACS transfer. She provides her own materials, such as shampoo etc, and has the right to send a qualified substitute to carry out her work, although this has never happened.
The client and salon have an agreement that she works on a commission only basis, but this is only a verbal contract. Is this acceptable, or should our client declare the full income and be charged 50% as chair rental?
Based on the first six months of trading, our client has earned over £50,000 for the salon, but of course, only received half of this. If this is all declared as income, she will exceed the VAT threshold. However, if only the monies received are declared as a commission based income, she won't.
My main concern is to do with employment status. If she isn't seen to be paying chair rental, will HMRC argue that she should be employed by the salon? Especially as she carries out 99.9% of her work there. Is it acceptable to work as self employed under a commission only basis and only declare the 50% she receives.
Replies (4)
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Verbal contract?
Does that include the right to provide a substitute?
Because she has never sent a substitute. All her takings go through the till. Virtually all her work is done there.
HMRC have cracked down on this area in recent years, and even accounting for chair rental is unlikely to deal with the employment status issue here.
Be careful that you don't open up a "can of worms" here.
If the salon is her employer, it should have been operating PAYE etc.
IMHO, from the brief information, I consider that she is more likely to fall within the self-employment camp.
Can she ask the salon if an HMRC status confirmation exists?
Chair rent scheme is long established and effective
Done properly a chair rent scheme is effective.
I believe that the best source of information is as follows:
http://www.i-salonsoftware.co.uk/blog/nhf-publishes-guide-to-chair-renti...
If established industry guidelines are properly followed then I don't see any problems, what I can't say is if the arrangements outlined in the question follow such guidelines (the guidelines are available to NHF memers).