Commission?

[Thompson24]

Hi guys

I have been asked to rent a chair to someone on a commison basis. When working out her weekly take do I take off vat before working out her commison or do I bais Her commison on the figures inc vat? She won't be vat reg but I am?

 

[Nails<3]

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[Thompson24]

Ah, so for example instead of 50% of the take the salon owner would only get 30% once she has took the 20% off what she would pay as vat?

 

[Chantelle<3]

I'm on commission she takes 20% vat off the amount then she takes 60% n I'm left with what ever is left over x

 

[squidgernetball]

Is up to you how you work it. You can charge her whatever you like, but you just pay vat on it.

Vic x

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[Grace_Hair]

Chantelle check legalities of this!!
Because that way you're not getting your full cut. She's causing you to pay her VAT.

The person who's VAT registered is supposed to be taking the VAT out of their cut.

Eg if it's 50/50. On £100 commission based stylist takes home £50. Salon owner £30 and taxman takes £20.

 

[squidgernetball]

Chantelle check legalities of this!!
Because that way you're not getting your full cut. She's causing you to pay her VAT.

The person who's VAT registered is supposed to be taking the VAT out of their cut.

Eg if it's 50/50. On £100 commission based stylist takes home £50. Salon owner £30 and taxman takes £20.

The salon owner would only pay vat on their cut so they would only pay the tax man £10 - their vat on their cut of £50.
As the therapist should be classed as self employed in this scenario, the £100 should never go through the salons books. The therapist should take all payments and give the salon their cut.

But agree about legalities. The salons vat has nothing to do with the therapist.

Vic x

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[Urbanspa]

Sorry to say but whoever processes the whole transaction is the one liable to pay VAT on the whole amount even if you end up paying a commission to a self employed stylist. I know this as I took on self employed stylists and that pushed me into the VAT bracket. It works like this;

Stylist generates £1000 per week
20% straight away to go to Vat man
Then the £800 balance can be divided in to commission.

I know this as I learnt a huge expensive lesson on this. Those who work on commission need to understand the above.

Hope this helps x

 

[squidgernetball]

The tax man says that a self employed stylist should take their own bookings and payments,as well add paying their own tax, which means that it shouldn't go through the salons accounts. So it should never be the salon paying the stylist, but the stylist paying the salon. In reality this doesn't happen, so a salon nearing the vat threshold can get hammered!

Vic x

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[Nails<3]

Sorry to say but whoever processes the whole transaction is the one liable to pay VAT on the whole amount even if you end up paying a commission to a self employed stylist. I know this as I took on self employed stylists and that pushed me into the VAT bracket. It works like this;

Stylist generates £1000 per week
20% straight away to go to Vat man
Then the £800 balance can be divided in to commission.

I know this as I learnt a huge expensive lesson on this. Those who work on commission need to understand the above.

Hope this helps x

If the stylist is not VAT registered then they shouldn't be paying VAT.

They take their payment from their client and pay the % owed to the salon owner. If the salon owner has to pay VAT on their % then that is not the stylists fault.

No self employed payments go through the salon books. The self employed person and salon owner are two seperate entities

The only thing you could do is increase the % amount the stylist pays to make up the shortfall.

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[Urbanspa]

Yep, I got hammered! The self employed stylists who came to us from another salon said where they previously worked the salon took the whole transaction and then they did the commission and this is how they operate. In this way of business I was right to take off VAT before the commissions were deducted as I was responsible for the whole of the income.

Everyone has a different set up, but keeping it as a self employed stylist receiving the full amount then declaring to the salon is best and that would be where the salon if liable for VAT will pay it on their portion.

I would never advise anyone to do it the way the stylists requested to me. But the way I have stated on how it was done my way is correct.

You live and you learn (hopefully from other people's mistakes like mine) xx

 

[surf girl]

Can I ask a few random questions here about vat please

When your vat registered you don't pay vat when u buy stuff... Right? Or no?

You have to charge vat on top of prices you charge... Be it rent or services or products... Right or no?

You pay the vat you collected from the above price increases to hmrc... Right or no?

Do you then claim anything back from hmrc in relation to vat?

Sorry to throw the thread off but I'm interested to know

 

[Grace_Hair]

Can I ask a few random questions here about vat please

When your vat registered you don't pay vat when u buy stuff... Right? Or no?

You have to charge vat on top of prices you charge... Be it rent or services or products... Right or no?

You pay the vat you collected from the above price increases to hmrc... Right or no?

Do you then claim anything back from hmrc in relation to vat?

Sorry to throw the thread off but I'm interested to know

I'm not VAT registered so I'm not entirely sure. But my dad is. So I know a bit.

You do pay VAT in everything as usual. However every month or whatever he has to put his all his ins and outs on the computer to claim back his VAT. X

 

[squidgernetball]

We have just gone vat registered.

You pay vat on everything, so I buy lots of stuff and pay 20% vat.
I do lots of treatments and have to pay 20% vat on the earnings of those treatments. How I do this is up to me. I can infuriate my clientele and put my prices up by 20% or I can absorb the cost and pay it out of what I've been earning and introduce a price increase slowly.

After my first quarter, I declare my earnings for which I pay vat and my bought items for which I'm due a return and they work out what I owe them, or if you do a lot of retail, what they owe me.

What I don't want to do is let my clients know I'm vat registered as they might immediately think "turnover is over £80,000 - she's loaded".
Unfortunately your vat bill isn't remotely interested in the profit or loss of your company!

Hope that helps

Vic x

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[surf girl]

Yes that makes a lot of sense, so the claiming back / paying on earnings is what's known as "ofset" and you pay the difference, yea I do get it now thank you

I Like how you've come to the desicion to absorb the vat for the moment, that must be a tuff desicion, but yes people would just assume your loaded lol, they don't understand turnover or overheads or anything about business for the most part! Well done for getting to the turnover level tho, let's hope we all end up loaded eventually! X

 

[squidgernetball]

I remember reading about a geek on here telling us that for the past 8 years, she had suppressed her salons earnings to avoid vat. She would do a pound a treatment through March and September to avoid the vat threshold. I wondered at the time how far her business could have gone if she had concentrated on growing her business instead of avoiding vat.

Of course, the huge advantage is if you retail lots, which we do. Obviously the profit isn't as great on retail, but the vat advantage is!

Apologies to the op for hijacking the thread!

Vic x

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