Hairdresser - Chair Rental or Commission?

Hairdresser - Chair Rental or Commission?

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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.

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Stepurhan
By stepurhan
22nd Apr 2015 12:13

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.

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By King_Maker
22nd Apr 2015 13:28

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?

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By DMGbus
22nd Apr 2015 13:49

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).

 

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By Lee11_1989
22nd Apr 2015 15:09

Thanks

From experience, I have usually found the we win against HMRC when a hairdresser is clearly paying chair rent to the salon. As long as there is a right to substitute and no direct control on how the work is carried out.

However, in this situation, our client wants to claim that her turnover is only 50% of what she earns for the salon, and doesn't pay chair rental. Instead, she is paid her share of the takings as a commission. It doesn't effect her profit levels, but in my opinion, it weakens her argument to self employed status. I think without chair rent being paid, it is easier for HMRC to argue that she should be employed.

Overall, I don't think it's a risk worth taking.

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