Tattoo studio, VAT question

Johnthefirst

Hi all.
I have a tattoo studio. Three artists work in the studio, they are self employed and pay 50% of their earnings to me (standard practice in tattooing). I'm approaching the VAT threshold. Now loosing 20% would be fine if it was a business that could recoup the loss - charge +VAT, but putting our prices up would price us out of the market and lose customers. Is there a way around this or do I just have to eat it? As technically the artists are renting their space from me would that allow any breaks?

Any help appreciated x

nomoneytoday

IMHO you need to see a good accountant, who may be able to cover their costs with savings.

00ec25

Johnthefirst wrote: »

Hi all.
I have a tattoo studio. Three artists work in the studio, they are self employed and pay 50% of their earnings to me (standard practice in tattooing). I'm approaching the VAT threshold. Now loosing 20% would be fine if it was a business that could recoup the loss - charge +VAT, but putting our prices up would price us out of the market and lose customers. Is there a way around this or do I just have to eat it? As technically the artists are renting their space from me would that allow any breaks?

no way round it.

your position is, I assume, the standard "rent a chair" one and therefore when "your" (the salon's) turnover crosses the VAT threshold, you must start charging VAT to the 3 artists, at which point either you or they absorb the price rise, or they pass it on to their customers.

the obvious "solution" would be one of them therefore finds a different studio to work from, at which point you presumably drop back below the VAT threshold and can de-register.

Don't forget however that once you are registered it will not be a full 20% increase as you will be able to recover any input tax you pay, which previously you could not do of course. Granted though, your costs may actually be pretty small if the artists buy all their own materials etc so your input VAT may be a small amount anyway.

https://www.taxassist.co.uk/resources/show-question-and-answer/id/419/

chrismac1

Agree the last post. Plus make sure your "rent a chair" contracts are totally compliant in word and deed with the requirements to be valid self-employment contracts, or the possible VAT hit will be the least of your worries.

"Rent a chair" has been a battleground between HMRC and hairdressers, and some of the hairdressers have finished up dead and wounded. In my view HMRC see them as an "easy hit" on the basis that they mostly are not that savvy about legal stuff.