Being charged VAT by salon owner

[Pinkpidge]

Hi can anyone help in this subject. I work self employed in one salon on a 50/50 split, which works well we all charge from the same price list and discuss offers ect between us. I was offered a Saturday in a second salon explained to salon owner my current situation, and this was something she wanted to do regarding pricelist offers ect as it's just less confusing for clients, the second salons prices are slightly higher and we agreed a 60/40 split to the salon owner. Anyway did my first Saturdays this week and cashed up ready to give my payment to owner and she told me I need to take from my cut vat as she vat registered, I kind of said well no that's not right, but she assured me it was, however if I had known at the time I would have negotiated the rate or reconsidered the offer due to that being a fair bit from share. Anyway does anyone have any advise is this right/wrong ? How would you advise i go forward if you have any experience I would be grateful if you could share with me thank you xxx

 

[daydreams01]

I would think because she is vat registered then the vat should come from her percentage. You are not vat registered so don't think it would come out of your share but I'm not sure. I would ask your accountant. Maybe it would be better to pay her a flat rate inclusive of vat then you know where you stand each week.

 

[BannerPenguin]

I think as she's invoicing you for the 60% she does need to charge VAT on what she invoices but I'm not 100% sure. It's a bit of a sticky situation. I think a flat fee is better but you'd still pay VAT on that.

 

[Pinkpidge]

Thank you, I was thinking I should contact an accountant but thought would ask on here first x

 

[Pinkpidge]

Really I'm a bit annoyed that it wasnt discussed initially as I would have negotiated a better rate for myself as now I'm only receiving 30% I understand she has to pay it but think such a large proportion should have been disscused x

 

[tink15]

I'm not sure what is correct, however I agree it should have been discussed prior to you starting there. She can't just throw it on you and expect you to add it to your percentage. You can explain as it wasn't brought to your attention prior to starting that either you want to re negotiate or want in included in your cut. To pay that on top of 60% is way too high a rate. I only charge my girls 35%. X

 

[Pinkpidge]

Thank you I'm just thinking this is so complicated now. I use my own card machine and now I have discovered that my receipts need to display the cost of vat in the prices as her salon prices include vat, so I think this maybe an impossible situation as maybe I could be doing something wrong, all because she never told me to start... x

 

[nailpod]

I would say that client pays x amount including vat, therefore it stands to reason if she pays you out the 40% it would have the vat amount (\by same split 60/40) already deducted.
And you could claim that vat back if you are registered if not then it's a loss for you.
I would think she might have explained beforehand and good for you to make sure not before doing another week end.
Too many sharks trying to get an extra buck out of people unnecessarily.

 

[Pinkpidge]

Thank you all advice greatly appreciated xx

 

[Carlalouise]

If she's VAT registered then she does have to charge you VAT, however I think the split should include the 20% otherwise you're not going to make a lot!! As you are not VAT registered you do not charge your clients VAT so therefore don't worry about receipts. It's a pain because you can't claim the VAT back but trust me, you don't want to be registered, the VAT man takes 20% of your turnover NOT profit!

 

[Pinkpidge]

Thanks Carla, sounds fair. So when I'm charging my clients I'm charging from her price list. So therefore those price already include vat, so when I'm charging an I charging vat? I'm really confused x

 

[BannerPenguin]

Thanks Carla, sounds fair. So when I'm charging my clients I'm charging from her price list. So therefore those price already include vat, so when I'm charging an I charging vat? I'm really confused x

Technically you should have your own price list. If she charges them they include VAT, if you charge them, they don't. You aren't legally allowed to charge VAT.

I know it's frustrating but from the business owners point of view it's not like she's making more money, she literally has to hand it all over. She may negotiate with you as I agree you need a bigger slice but with the VAT implication on her side I don't know how much she will budge.

 

[Pinkpidge]

Hi banner. Thank you. Yes totally understand that about the vat I know it's not the salon owners, but with her 60 year I was believing that all over head are covered and 40 was mine. I'm really concerned now about what I charge ect. I don't think this can work I would be mortified if I was breaking the law

 

[Carlalouise]

You can charge the same amount as her, you just won't have to pay VAT to the HMRC.

As the owner is registered anything she makes from you she will have to pay VAT on, so she can either take the hit herself or charge you 60% rent plus VAT, so in a round a bout way your clients have paid VAT on your services, it's just that the salon owner, not you are paying it to HMRC.

No law broken - hope that makes sense. X

 

[squidgernetball]

So from a different perspective.
My clients pay vat. I absorbed the vat costs and have to issue a receipt showing the vat paid. In the same way that your manager takes your money, she can either increase your costs to work there or absorb the vat herself.
You are not vat registered but she is. The vat is her problem. I think she's probably trying it on. I would suggest it's not worth it for you and see what she says.

Good luck

Vic x

 

[Pinkpidge]

Hi guys thanks for all your replies. I went in Saturdays ready to discuss the matter however we were really busy so was waiting until the end of the day. Anyway decided not to have the conversation and just out right leave when she told me that she would add up my totals and give me what she owes me, never bothered explaining to her this is not how it works. Left her too it xxx

 

[nailpod]

Perhaps the owner is a bit unfamiliar with taxes and genuinely ignorant. I would send her a message or say why you are leaving so if she is innocently doing this she can stop for the future or if she did it purposely then she will know it is not acceptable.