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URGENT Commission/Rental Contract gone belly up! - 11-01-11, 04:22 PM

Hi Guys & Gals,

I need some urgent advice.

I have agreed to work as a nail tech in a hair salon on a commission basis.

This was agreed beginning of Dec with me due to start beginning of Jan, my 'stuff' is there but I haven't actually done any work as yet as we are currently going through the negotiating of the contract and I dont want to start collecting clients before the contract is set up.

Ok . . . . .

So I received a phone call, the boss has spoken to her accountant this morning who has told her that "The HMRC dont like commission based rentals as they believe self employed people should be making losses aswell as earning"

She has now suggested that I pay her a daily rental and a % of bills !

She asked my views and I said I wasnt really sure as I had never come across it done like that before.

She is going to ring me later to discuss it further as she is sending back the contract for me to look at after my solicitor made some ammendments to her original.

Just looking for any advice / info please if anyone can help.

Is that right what the HMRC say ? Does no-one really do commission based rentals anymore ???

Any help would be much appreciated.

I have a feeling that they've changed their minds and dont want me there anymore so they're making it difficult for me so I don't take it on
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11-01-11, 04:35 PM

I don't do % splits as they are such a problem regarding the revenue and employment law. All of mine pay a weekly rent which is set and doesn't change.
If her salon is vat registered, your turnover would count as hers, and vat should be charged before the % split. Not what you want.
Also, it can be argued that you are to all intent and purpose an employee if you are on % basis, and she should be paying employers NI, hol pay and mat pay etc.
Self employed people should simply rent a defined space, set their own hours of work and handle their own takings. That is the HMRC guidance.
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11-01-11, 04:42 PM

Thanks for your reply Persianista.

Im not good with things like this, so what you've put has sort f gone over my head

Could you poss explain it please in simple terms to a divvy like me

Im just confused as she had made an agreement that it would be % based, the contract says % based but now she wants rental, Im not usre what sort of implications this will have on me compared to % based.

Its a very small salon & with just 2 hair stylists there and thats it.
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11-01-11, 06:50 PM

I work for % at a salon, but I am also mobile so do not rely on the salon alone to make money/clients.

If you are solely working at the salon, then your not classed as being fully 'self employed' as you are usually working a rough set number of days/hours in one place - therefore basically employed there. To be truly self employed you should be working at more than one place. This would be the same even if you rented a room from a salon.

Might be worth giving HMRC a quick call and see what they say just to clarify things?


Though I dont know why she wants to take a percentage AND money for bills on top - this should all be included in the percentage surely?
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11-01-11, 07:09 PM

I do work from home aswell.

I'll ring HMRC and see what they say.

Im a bit bamboozled by it.

Hopefully she'll ring me soon & i'll have some more info
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11-01-11, 08:15 PM

If you sign a contract based on % then it should state the actual % i.e. they get 20% of your gross or net profit. If you pay a rental then you should not be asked to pay a % of the salon bills too.

Whatever you do get a lawyer to look over the contract before you sign to make sure that someone is looking after your best interest. Of the salons I go into they get a % of what I take in during that clinic, this is set by me and is under regular reviews. If the salon doesn't provide any clients then their % is reduced whereas if they provide a lot of clients then they are rewarded for this.
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11-01-11, 08:43 PM

If the client pays the salon, then the salon should pay 20% to the vat man, then work out your % of what is left. Not great.

It Should be that the client pays you the stylist/ therapist direct. That way no vat is payable. You then pay the salon for the rent of the space, whether it is a set amount or a % is dependant on how you agree it.

My renters pay a set rent each week. Clients pay them direct. The money does not come through my till.
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11-01-11, 09:13 PM

When I rented, I paid the salon 25% of every service I did. So a set of nails at 20 (just to make the maths easy) I gave the salon 5. I did not give the salon any of my retail sales money or any tips I made.
But I did give the salon owner a free set of nails every 3 weeks and she let me pay the same staff discounted prices for things in her salon as her employee's did.
For that 25% I got, use of the phone, her staff took bookings for me and use of the debit card machine. The way that was done was, my customer, used their card and the salon gave me the same amount cash. I then gave them in cash their 25%.
But I have to ask you, why do you want to pay someone else any of your money when you work from home? You are increasing your overheads, me personley would prefer to have leaflets printed and arrange for them to be delivered with the local free news paper and keep my home salon.
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11-01-11, 09:15 PM

We have a self-employed beautician and a self employed nail tech. Both pay a daily rent and have a contract highlighting which days they prefer to work, this is fixed. Their rental includes all utilities, the salon computerised system, till and pdq. They supply their own products, record cards etc and hold a UTR, this is what HMRC gives all self-employed persons but they must register themselves as self-employed. They also have their own accountants.

I have never heard of the following, so this is something I will look into: "If you are solely working at the salon, then your not classed as being fully 'self employed' as you are usually working a rough set number of days/hours in one place - therefore basically employed there. To be truly self employed you should be working at more than one place. This would be the same even if you rented a room from a salon"

We had looked at a % split but as Persianista advises this is difficult to work out and can be more complicated, particularly if the salon is VAT registered.

It is adviseable that they do manage their own money but in the contract I give our ladies options and they sign which method they prefer.

All said and done I would strongly recommend that you talk to your own accountant for their advice, HMRC and get the contract checked over.

HTH
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11-01-11, 09:32 PM

I really appreciate all your replies.

My solicitors are looking into it all for me, but helpful to know other peoples experiences/points of view

I work from home, but the salon is in a prime location even if it is a small salon, with huge potential to make a great business for nails as there are no nail salons in a min of 4 mile radius! So thats why I want to move there, also so I can have my home back !

I dont know how anything like this works, I have never been in a salon or no anyone who has done it before so my main concern is that they may try taking advantage of my naivity of it all.

Its a very small salon, 2 stylists, no pdq machine etc, mainly a little old lady hairdressers but has such huge potential.

I just want to make sure Im doing the right thing
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11-01-11, 11:49 PM

Quote:
Originally Posted by taggyboy View Post
I have never heard of the following, so this is something I will look into: "If you are solely working at the salon, then your not classed as being fully 'self employed' as you are usually working a rough set number of days/hours in one place - therefore basically employed there. To be truly self employed you should be working at more than one place. This would be the same even if you rented a room from a salon"
Yep, on the face of it that is true enough. I had a situation once where I did IT "consultancy" for one company and their payroll & hr depts had me jumping through hoops to prove I was self employed so that they didn't find themselves in trouble with HMRC. The way we got around it was that I provided my own 'materials' (in my case it was a laptop) and invoiced them on a monthly basis. In this case you may be able to get around it by providing your own equipment etc etc.

As for % v rent, do one or the other, not a combination of both. If you rent, it's a flat rate that is inclusive of bills etc, if you do % then it's just that, a % of your takings. Combining the two seems a bit crazy to me.
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