Should I be paying VAT?

Shysta

I am a self employed hairdresser working within a salon environment full time. I was hired on a 50/50 cut arrangement, with cost of products used also deducted. I have received my first wage slip, and the owner of the salon has deducted 20% VAT from my total earnings, and has then taken a 50% cut, as well as deducting cost of products used. Am I meant to pay this VAT on the amount I've charged? Or should it be paid by the salon?

Thank you in advance!

Pennywise

If the salon is VAT registered then one sixth of the amount paid by the customer goes to the VAT man, leaving 5/6ths to be split 50:50. Basically if the customer is paying £24, then that's £20 for you/salon and £4 for the VAT man. Just makes sure that your "product" cost deducted is also net and not gross, i.e. if your products cost £12 (£10 plus £2 vat), then that's £10 cost and £2 vat, so it's the £10 that you should have deducted not £12 as the salon will be deducting the £2 off it's VAT bill.

Shysta

Hello,

Thanks for your reply, so just to clarify, if I had a total chargeable of £1000 for a month, currently the salon is deducting £200 for VAT, leaving £800, which is then halved, leaving £400, which then has my product usage deducted from, which I assume isn't vat deducted. Does that seem correct?

Nearlyold

Shysta wrote: »

Hello,

Thanks for your reply, so just to clarify, if I had a total chargeable of £1000 for a month, currently the salon is deducting £200 for VAT, leaving £800, which is then halved, leaving £400, which then has my product usage deducted from, which I assume isn't vat deducted. Does that seem correct?

If the chargeable was £1000 including VAT then the pre vat chargeable is £833.33 (because £833 plus 20% is £1,000) - the salon is deducting too much if they deduct £200.

Money_Grabber13579

The bigger question might actually be whether you really are self-employed....

If, as it sounds like, you only work for 1 salon, which provides all of the products which are used, you might well be deemed to be an employee. In which case, your VAT issues would go away, but potentially create a new set of PAYE/NIC issues instead.

I know it's not the question you asked, but everything needs to be considered.