Hi All, I have a client who has an hair salon. My question is this - she rents a chair out to a self employed lady but is currently putting it through the till as a sale, thus paying vat but could we invoice the lady for the rental of the chair and thus not charge vat with a T9 tax code.
Yes i agree with Back Office group. The Owner of the Hair Salon is Vat Registered so should charge vat to the self employed lady. include it in the vat return as output tax and post it T1 tax code if that is the standard rated code you are using. Rent is still a form of income for the business.
-- Edited by Davey on Monday 16th of November 2009 04:58:57 PM
I agree with the other posters, if the hairdresser is vat reistered then she must charge vat on the chair rent. Also make sure that she has a good rental contract with the self employed hairdresser. This is one of the areas that the revenue concentrate on. They hate chair rental, they see it as a way of avoiding PAYE and NI. Would be worth advising your client to see a solicitor to draw up a waterproof contract.
I know I keep going on about contracts but the Revenue have a team whose sole job is to go into businesses and ask them to prove that their sub-contractors/chair renters etc are actually self employed. If they don't feel that they are self employed they will tell your client that the people are employed and suddenly big tax/NI bills start flying around, along with interest and fines. We need to ensure that our clients don't fall into this trap so where ever possbile, advise your client to get a contract drawn up between themselves and any self employed contractors they use on a regular basis. It may cost a couple of hundred with a solicitor but it will save a fortune and a lot of tears in the long run. Plus, once they have the base contract, they can copy it onto the computer and re use time and again, just change the name.
-- Edited by farmergiles on Monday 16th of November 2009 05:32:58 PM
b) If you have self-employed persons providing hair and beauty services within your salon the VAT treatment depends on whether they are working as independent contractors (commonly referred to within the trade as chair rentals), or whether they are subcontracted to you. Subcontractor a self-employed person who is under contract to you to provide services to your salon, which then supplies hairdressing services to customers. In these circumstances the full amount of the income received is included in your taxable turnover. Independent contractor a self-employed person who provides a service direct to clients rather than to the salon. If they use your salons facilities and services, the rent you receive is a standard-rated payment for the supply of those facilities and services, and must be included in your salons taxable turnover for VAT purposes. However where, under a written agreement, stylists operate their entire business from a separate and designated part of the premises, the salon owner may be making an exempt supply of a licence to occupy land. If you are in any doubt about the liability of the supply you should contact the Customs and Excise National Advice Service (NAS see Chapter 3.2 for details).
Hope that helps
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