How do salons charge for chair rental?
The chair rental fee is normally either a fixed price or a percentage of the takings taken. In some circumstances, a mixture of the 2 approaches might be taken; a smaller fixed fee & a percentage of the takings.
Treatment of VAT on chair rental:
This rental income had previously been exempt from VAT in certain cases, but from 1 October 2012 it will always be subject to standard rate VAT. Therefore, this means the chair rental income will now always be counted as turnover for a hairdressers’ business. Salon owners will need to take this into consideration, when checking whether they have exceeded the VAT Registration threshold.
How money should be treated:
Money received from clients (paid to the person renting the chair) legally remains the property of the person renting the chair, regardless of whether it’s collected via the main till in the salon.
Money collected centrally must either be handed over to the person renting the chair.
If the salon collects money on behalf of the person renting the chair, then it will contribute to the salon’s turnover. As a result VAT will apply if the salon is over the threshold for registration. This is still the case, even if the money is then paid to the person renting the chair.
Is the person renting the chair self employed or actually an employee?
This is a hugely important area that both the salon owner & the person renting the chair need to understand.
The chair renter must have their own insurance in place.
Any complaints about the work done by the person renting the chair should be dealt with by them directly (not through the salon).
Both the chair renter & salon must be responsible for keeping their own accounts & paying their own taxes.
There should be a written agreement in place, which states what is provided by the salon & at what cost.
The person renting the chair must be able to decide when they work, which products they use & what they wear.
Prior to the person renting the chair, there should be a written agreement which states whether the chair rent is a fixed amount or a percentage of the takings.
Both the person renting the chair & the salon owner should have ultimate control over their businesses.
Both parties should be capable of suffering losses, as well as enjoying their own profits.
Both parties should be able to compete openly for their own clients & to reject clients of their choosing.
The person renting the chair should have access to their business at all times.
The person renting the chair should be able to decide when they’re open.
The person renting the chair should be in direct contact with their own clients.
This list isn’t exhaustive, but it is to act as a guide.
A written agreement between the salon & person renting the chair:
It is strongly advisable that there’s a written agreement between both parties. I’m not going to include any guidance on this as I’m not a qualified solicitor. However, if you google for ‘salon chair rental agreements’, you will find some templates that could be used.
