Rental payments

[tillyxxannexx]

How do you take payments from the clients of your beauty/hair space rentals? Do you let them take their own payments and just take the rental fee?

 

[salonfrog]

You have 2 options:
I. The salon takes client payments (as it does for its own clients). It takes this money on behalf of the renter and must pay it back to the renter following the terms in the contract between the them. HMRC allows this but ensure you’re set up 100% correctly.

2. Like you say, the renter takes client payments.
Either way, the salon charges a rental fee separately.

 

[AcidPerm]

@salonfrog
My understanding is that if the salon takes the payments, all the income they receive through their till is included in the calculation for whether the VAT threshold is reached and if so, then VAT is applied.

Can you confirm if this is correct?

 

[salonfrog]

@salonfrog
My understanding is that if the salon takes the payments, all the income they receive through their till is included in the calculation for whether the VAT threshold is reached and if so, then VAT is applied.

Can you confirm if this is correct?

Hi @Haircutz

No, not correct and a bit of a misconception in the industry.

HMRC will look at the whole arrangement (both from the point of view of the contract and what is happening in reality) by going through the NHBF/HMRC agreement, as well as its CEST tool.

The NHBF/HMRC agreement includes the following:

4 Money

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

And this is why if a salon follows option 1 (in my answer above), it needs to ensure it's set up 100% correctly.
The money it collects, it does so as part of its rental agreement - as an added service.

Hope that helps clarify but ask any questions.

thanks