Staying on the Right Side of the Law as a Salon Owner with Chair Renters

As a salon owner, you may be considering using chair renters in your business to reduce costs. However, HMRC is cracking down on salons treating these renters like employees without providing proper payroll, taxes, and benefits. Don't get caught out! Follow these guidelines to legally set up your chair rental arrangements.

Why Chair Rental Models Are Appealing

With rising overhead costs to run a salon and staff, many owners are shifting to chair/room rental models. The perks include:

Reduced salaries, taxes, and benefit costs

Less worry about covering wages, sick days, etc.

Renters manage their own clientele and schedules

However, there are legal requirements you must meet for these arrangements.

Chair Renter vs Employee Distinctions

Chair renters are essentially running their own small business within your salon walls. They should have autonomy over their schedule, services, products, and pricing.

Here are key requirements chair renters must meet

Have their own accounts, pay their own income taxes and health/safety requirements

Carry their own public liability insurance

Set their own prices and choose when and how much to work

Have a rental agreement outlining salon provisions and fees

Manage their own appointments, clients, complaints etc.

Consequences for Misclassifying Renters

If HMRC decides you have misclassified an employee as a chair renter, consequences can include:

Back taxes and payments owed for the renter

VAT payments if their earnings pushed you over the VAT threshold

Potential tax fraud accusations

So follow the guidelines closely! The agreement terms, income collection methods, and working relationship dynamic carry the most weight if HMRC investigates.

Setting up Compliant Arrangements

While no single guideline makes or breaks compliance, aiming to fufill all the suggestions shows your renters have an independent contractor status.

Some top areas to address

Have a written rental agreement

Collect renter income separately, do not mix with salon earnings.

Make sure renters manage their own appointments, clients, issues.

Enable renters to freely set schedules, services, pricing.