Self employed in salon, how do you handle VAT?

[Seraphine]

I've been mobile self employed for 7 years, and am looking at doing space rental in a salon.

As I'm not making a lot per year (have been part time due to children) I've not been paying VAT. The salon I'd like to work for does charge VAT. The salon's accountant has said that I'd need to charge VAT too if I worked there, even though I'd be a separate entity (clients would pay me separately... I'd just be paying for space). The owner was going to ask for more clarification this week, but I thought I'd ask here.

Is that true, or have I missed something? How do salon owners/renters manage the VAT issue in your salons?

I'd be grateful for some assistance with this - it's my first foray into salon work after being mobile/home studio based all this time, and I feel a bit out of my depth as I know nothing about VAT rules.

Please help? Thank you x

 

[libbylou]

You are a separate business just renting the room. so no, unless you are vat registered, you would not charge your clients vat. It would be illegal to charge vat when you are not registered. You would however pay vat on your room rental, if the business is vat registered.

 

[Seraphine]

You are a separate business just renting the room. so no, unless you are vat registered, you would not charge your clients vat. It would be illegal to charge vat when you are not registered. You would however pay vat on your room rental, if the business is vat registered.

See, that's what I was expecting! I'll let the salon owner know.

Thank you, Libbylou!


Can anyone else report what they do in their salons?

 

[BBS77]

I am in the same situation. We however have a clever booking and till system that knows all my clients are separate and are therefore not VATable. It means that although I do pay VAT on my room rental (there's no way round this) if a client has their nails done in the salon and a wax with me in my treatment room, only the nails are VATable even though they pay it all together.

This did take a while to sort out with the help of HMRC and accountants but we really wanted the payment side of things to be seamless rather than clients having to pay twice on one visit to the salon.

If you are taking your money separately you definitely don't need to be VAT registered, you'll just have to take the hit on the 20% on your room rent. Xx

 

[squidgernetball]

As someone renting a room your treatments and earnings are nothing to do with the salon so not vatable. You pay rent to a premises that is vat registered so you pay them vat on your rent and that is all.

Vic

Sent from my GT-I9195 using SalonGeek mobile app

 

[Urbanspa]

The only way the salon can charge you VAT on your turnover is if all your clients pay the salon and you get paid a % of your turnover. So for example say you do £1000 of treatments/sales per week and you get 40% cut, the salon is within their right to take off the VAT at 20% off the £1000 and then less your 40% off of that.

As long as you either have a sophisticated till like another poster said or take and process your own payments fully, you can only be charged VAT on the room rental and as long as your turnover is under the VAT Threshold you will not pay any VAT out of your takings. So in a nut shell, keep your clients paying you separately to their till and then you cannot be taken for a ride.

This is from a personal situation I was in from a bad accountant not giving me the most efficient and cost effective way of operating.