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VAT and hair salons

Q: My client is a UK VAT registered company operating a hairdressing salon. At the present time there is 1 director and 4 employees. As turnover has dropped recently they are looking at ways of cutting costs. The director does some of the hairdressing as well as the 4 employed stylists. Could they restructure their business so that the stylists become self-employed providing hair styling services direct to the clientele? What are the VAT implications of the client renting chairs to these self-employed stylists?

A: It is possible to structure the business such that the stylists supply hairstyling services direct to the clientele and the company supplies hairstyling services by the director and supplies of chair rentals to the self-employed stylists, both of which will be standard-rated.

It is vital that clear and correct agreements are entered into (and these agreements are actually applied in practice), for instance the stylists could have their own card machines / cashbox as well as their own pricelist. It must also be clear to the clientele that they are buying their haircut from the stylists directly instead of the company / salon.