HMRC guidelines for determining self employment

Discussion in 'Business' started by Haircutz, Nov 6, 2015.

  1. Haircutz
    Staff Member

    VTAXPER69100 - Particular trades: Hairdressing:
    Guidelines agreed with the National Federation of Hairdressers

    [Important note: Not all of the guidelines have to be met in any given situation. They remain what they are called, guidelines. They are indicators of the type of relationship that exists and some (like employment status of the stylists; the agreement between the parties - whether spoken or written, and the way the money/takings are handled) will carry more weight than others. In any event, you should always read them in conjunction with the foregoing guidance on hairdressing, in particular VTAXPER68600.]

    Intent and general principles

    To establish a business relationship other than that of employer and employee with the intent by the parties concerned to control their own actions and destiny through observance of the following basic principles:

    each party to have ultimate command and authority over all aspects of their respective business or enterprise, and to be readily identified as having such authority;
    each party to be responsible for the finances of their respective business or enterprise, and to reap the rewards and losses arising therefrom;
    neither party to be solely obligated to - or rely or depend upon - the decisions of the other.


    These guidelines support the above and will be used as a means of interpreting the intentions and principles of the parties concerned against their established working practises and procedures. The Guidelines are not exclusive but are indicators of the type of relationship that exists.

    1. Status
    The independent contractor (the Contractor) within a salon should be self-employed. An employee cannot establish an independent business within the establishment of the employer.
    The business or enterprise of the Contractor should be independent of, and separate to, that of the salon and:
    maintain its own books and accounting records;
    be responsible for its own taxation affairs, health and safety procedures;
    attend to its own insurance requirements, including public liability insurance;
    be capable of suffering losses (negative profit) as well as enjoying profits;
    have complete freedom to establish its own price structure and times of opening (including closure for holidays);
    purchase consumables and products from any source, and sell any product range;
    be able to compete openly for clients both inside and outside the salon, and to accept or reject clients at will;
    be free to appoint locum tenens as the need arises;
    be free of restrictions about the sale, disposal or relocation of the business;
    display a notice giving the name of the Contractor and address at which documents may be served as required by Section 4 of the Business Names Act 1985;
    respond to actions brought against it by third parties;
    have its own stationary for business letters, written orders, invoices and receipts.

    2. Access
    Ideally, there would be separate access to that part of the salon in which the business of the Contractor is situated.
    The Contractor to have access to their business at all times and have the ability to be open for custom at any time of their choice.

    3. Clients
    The clients should be in direct contract with the Contractor and be fully aware of this fact.
    Complaints and claims from clients of the Contractor should be directed to the Contractor and not the salon.
    Separate appointments (where applicable) should be maintained by or for the Contractor.
    Casual clients entering the salon should themselves choose whether to patronise the Contractor or salon, and should have sufficient information to make such a choice based on:
    the name(s) and possibly portraits, displayed in the reception area;
    an identifiable list of specialities and price lists displayed in the reception area for each Contractor;
    the times to wait before receiving attention.
    The details, records, and addresses of clients who receive attention from the Contractor to be the property of the Contractor.

    4. Money
    The money received from clients attended by the Contractor to be the property of the Contractor, whether or not it is taken centrally.
    Money collected centrally should either be handed over to the Contractor or paid into an account held in the name of the Contractor.
    Money held for and on behalf of the Contractor, and the salon holding such funds should account to the Contractor for those funds.

    5. Salon environment
    The salon should not exercise control over the Contractor, or impose upon the Contractor codes or standards relating to hygiene or behaviour unless applied equally against all parties with observance measured by an independent authority or peer pressure. Safety regulations imposed on the Contractor by the salon should be no more than that required to comply with current legislation.
    The Contractor to be responsible for the conduct, appearance and presentation of the Contractor’s enterprise, and in particular for behaviour, hygiene and safety matters relating to, or arising from, the Contractor’s activities.
    There should be clear agreements in respect of services provided by the salon including:
    the provision of telephone, heat, light and water;
    available accommodation for clients;
    reception, appointment booking and cash handling facilities;
    use of salon personnel for specific duties and the control and discipline arrangements for such personnel;
    use and availability of furniture, fittings and equipment;
    laundry services;
    marketing and promotion of hairdressing services;
    cleaning and washing of floors and equipment;
    access and security;
    the amount to be paid by way of rent for use of space;
    the amount to be paid for use of services, cleaning and maintenance of communal areas or how such charge is to be calculated.

    6. Agreement
    There should be a clear agreement in writing between the salon and the Contractor that accurately reflects actual working practice.
    There should be a clear statement in respect of the term of the agreement, and the obligations and responsibilities of the parties on termination, notice required on termination and where that notice is to be served.
    That VAT is to be levied (when applicable) on the charge paid by the Contractor for the services provided by the salon.
    The Contractor is responsible for insuring the enterprise against public and product liabilities, losses that could arise as a result of theft, fire, storm, accidental damage etc, and statutory cover in respect of staff retained by the enterprise.
    Top of page

    Independent Contractor - a self employed person who provides an independent hairdressing and/or beauty therapy service to the general public from within a salon owned and operated by another person or company.

    Edited: to add ACAS helpline number: 0300 123 1100
    Last edited: Dec 29, 2016
  2. Haircutz
    Staff Member
    I'm hoping that by making this thread into a sticky, it will be easier for geeks to find it or be referred to it whenever they need to check if their current arrangement is fit for purpose.

    Please keep any posts on this thread on topic.

    Thank you.
  3. laurakate
    So pleased to see this. I have lost count of the number of people who tried to fob me off with wanting to call me self employed whilst wanting to treat me like an employee, especially when I was looking for employment at the start of my beauty career. I'm glad to say that I ran for the hills from people like that.

    It's important for the industry to clamp down on exploitation of people who just want to get paid properly as a professional for their work.
  4. bonderella
    Can any hairdresser who is self employed and rents a chair in a salon explain

    How the VAT works?
    What is the normal expenses you pay for?
    Where do you store all your stock individually?
    Would you be able to give me an example of a weekly or monthly costing ?

    Thanks so much in advance
  5. surf girl
    I rent a chair out to a stylist.

    She's not earning £74k so isn't vat registered

    She buys her own stock & products, I provide everything else.

    We have a shelf each in the mixing room & a trolley for tools each.

    Price to rent a chair is individual to each business, location & wether the owner provides the stock and products will determine this.
    bonderella likes this.
  6. squidgernetball
    The stylist takes their own money and pays you their share. If you take the money you would be falsely inflating your figures so you may have to become vat registered or if already registered you'd be paying vat on money that you wouldn't need to.

    When the stylist earns over the vat threshold they would be responsible for their vat. Although this is unlikely, remember vat is paid on turnover not profit.

    Vic x
    bonderella and Haircutz like this.
  7. bonderella
    Thanks xx
    Last edited by a moderator: Jul 9, 2016
  8. Sara-Jo
    This was really helpful as I rent a room where i pay rent and everything else is my responsibility ie the prices i charge my choice of products etc... and have just gone to leave to be closer to home so i get to see my family and tge salon owner wants me to be still self employed but on commission based rather than rent a space. She wants to set my prices and choose what products i use etc.... it's just not right. Xx
    laurakate likes this.
  9. loststylist
    Hey, I'm new to the forum and hoping for some help regarding this topic....

    I'm currently having a few problems with the salon I work within, firstly I don't have a contract which concerns me, I have broached it several times but the owner says she hasn't had enough time (I've been there 2 years)...

    What's more concerning is recently the owner has become more dictatorial...

    The owner now dictates when I have to be in the salon (even if I have no bookings), I am told how much holiday I can take (I don't get paid), what to wear (nobody else is) and I now have no access to my clients details, nor can I manage my own diary - it is all 'owned & managed' by the business, part of streamlining the business apparently. I used to buy all my own products, but she's taken responsibility for that, although not (and will not) compensated me for the products that I did purchase to begin with (£700ish) I'm frightened of just taking it as i don't want to be labled a thief, and to top it off one of her employed juniors broke a pair of my scissors & clippers and she refuses to pay out for those (have to claim against my own insurance!).

    I am paid 50% of what I take (The salon takes the money, and pays me weekly from that)... The owner considers me self-employed, and therefore not entitled to any standard employment rights (holiday pay, sick pay, etc)...

    I have Lupus and recently have been seriously unwell & unfortunately need to take some time off - the owner is getting very imposing upon me and telling me that I need to attend appointments in my own time... I can only take full days off, not half, and even if I have nothing booked in on a day I have to be in the salon...

    Am I being stupid or would this set-up make me an Employee rather than Self-Employed? I feel like I'm being used and it's drastically worsening my health as I'm anxious (I've been a stylist and for 14 years and I'm nearly 30 FGS!) of being in the shop and not making money when I could be resting or attending appointments!

    What can I do, she flips if I speak to her about anything like this...? I should probably leave, but I'm frightened that she's going to go to war over my clients... Oh god, I'm so stuck I just don't know what to do - please help :-(
  10. FlawlessBeauty
    If you are self employed you would usually take the money and give the salon owner either a set rate or percentage. 40:60 in favour of whoever is paying for products is a common percentage.

    You would set your own hours and have control of your diary and client records.

    It sounds like she wants an employee without paying for one. Do you think she is trying to get you to leave because you've been unwell?
  11. loststylist
    I think she's trying to get her claws into my client base - I'm the biggest earner in the shop, everyone else is employed on a average wage... Streamlining the business is the term that's constantly thrown around.

    I feel enslaved - I can't leave suddenly because I have nowhere to go, I would like my money, I'm being dragged in and not being paid, I can't to gteg stock in again... Argh I'm trapped.
  12. Paige.xx
    I had this exact thing happen to me when I was self employed. I got told I had to be in the salon between 9 and 5 when I would do my clients & go. They wanted someone employed but didn't want to pay me to be employed. The best thing I did was leave. If I was you I would look into moving your business to a different salon where you can be happier. X
    laurakate and CFBS like this.
  13. Baggybear
    The only contract you should have as a self employed therapist is a rental agreement.

    The salon owner (YOUR LANDLORD) can not tell you when to work, when to take holidays, when to take a half day or day off, what to wear, what to charge, what products to use etc... Your running you own business inside her building - You are your own boss.

    Your clients details are yours, and it is against the DATA Protection laws for her to take those details - get them back asap and don't let her take any copies as it is your responsibility to protect that data and you could get into big trouble for not having kept it safe.

    I'd tell her "Streamlining the business" is fine but you can't streamline MY business, just your own and you are my landlord not my boss as you said I am self employed.

    What can you do? (Not saying you should do any of the below but they are options).
    You could tell her that you would be happy to change to a set rate rent per week so she knows what she is getting every week & this should lessen her worries about you being in the shop or not - as either way she would still get her set rent.
    You could tell her she needs to decide if you are self employed or employed and state that whichever she chooses you want her to comply fully with (Stop dictating your hours etc.. if you remain self employed OR pay you sick pay, holiday pay, NI, tax etc.. if you are employed).
    Look for somewhere else to move to asap.
    Report her to HMRC as they do NOT like businesses that treat self employed as employed and they can come down hard on them.
  14. loststylist
    Thanks so much for your input and help, I really appreciate it.

    Hopefully I can broach the subject without her getting aggressive, very unlikely though. I'm going to keep my head down, save some cash & I'm hoping to open a studio in my house now... I think that's the best option! My soul is being destroyed and my health is taking the toll!!
  15. Haircutz
    Staff Member
    Sounds like a typical sham employment arrangement, unfortunately.
    What she's doing is illegal on several counts and she clearly has no consideration for your health & wellbeing with regards to time off for medical appointments.

    Besides losing out on holiday pay you are also losing your pension rights as she's not paying your class 1 contributions.

    Why not contact HMRC and ask for advice?

    She needs closing down in my opinion. She's treating 'staff' no better than battery chickens effectively!
    laurakate likes this.
  16. surf girl
    Phone hmrc ASAP, don't let it upset you any further, she's breaking the law & causing you distress, you could speak to a solicitor afterwards and see what they have to say about it too, I feel a case there
  17. CocoAllure
    I think she's trying to get rid of you in a sly way
  18. Blush Academy UK
    'Cake and eat it' springs to mind :-/
    Why don't you do mobile?
  19. Joseph Ray
    Awesome guide! Thanks for the info.
  20. 6erardmer
    Good luck I was reading your post. I feel for you the same thing happened to me forced to go self employed but dictating when to work on a fixed hourly rate at the end I left she still owes me over £200 and I'm now employed which is what I wanted all along. Don't stand for it I know it's hard it took me a couple of months to find a new job and the stress it caused me not worth it. The best of luck to you look after yourself .

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