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31 October 2022
Hairdresser’s salon
A client rents the freehold of a building and trades as a hairdressing salon. She provides services along with four self-employed stylists. She is VAT registered but the stylists are not. The landlord does not charge her VAT on the building rent. She charges a turnover rent to each stylist which is subject to VAT as a rent-a-chair arrangement. My client has suggested an alternative business model to save VAT:
- the landlord will directly invoice each stylist for use of the premises (about £50 000 a year the same as the current rent charged to my client);
- my client will charge a consultancy fee to each stylist for giving them the benefit of her experience in the trade. This income will be taxable – about £30 000 a year – along with her own hairdressing work which is for a similar amount.
Overall my client’s total...
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