Readers' forum: Salon services

I act for a beauty salon (sole trader) that is not VAT registered. As well as doing some of the work herself the owner subcontracts various services to other specialists retaining 25% of the fees. The problem is that the income linked to the specialists will soon take her over the VAT registration threshold if the gross amount paid by her clients is treated as part of her ‘taxable sales’ figure.

Could the subcontractors receive the money directly from the clients and then pay the salon owner a VAT-exempt rent for the exclusive use of a room at her premises?

Needless to say that rent would equal 25% of the fee for the consultation in question. This arrangement will then easily keep my client’s taxable sales figure below the threshold because only her own fees would be relevant. This issue is important because the VAT registration threshold...