Tattoo Stuido VAT calculation

TattooMike

Hey there,

Hope you're doing well! I recently started running a tattoo studio in London and have a quick question about calculating VAT on our income. The studio covers most supplies except needles and inks, and our tattoo artists (all are self-employed)work on a percentage split, varying from 50/50 to 30(studio)/70(artists) depending on the job.

Could you advise on whether I should calculate VAT based on the entire amount received by the studio, including the artists' percentage, or if it's only on the studio's share after the split (30-50% of all)?

Thanks a bunch for your help!

DullGreyGuy

Are the running costs all yours to carry? Do you "sell" the needles/inks etc to the artists or is that to be covered by your percentage?

Is the money paid to you and then distributed to the artists or paid to them and they have to then pay you for their chair etc?

What is the split of? Revenue? Profits? Are any of the artists VAT registered themselves?

TattooMike

As a limited company, the studio covers all business-related costs, including bills, business rates, and other tattoo supplies. However,  we do not sell needles/ink, etc to our artists.

Our payment process involves customers paying at the reception for each job, and artists receive their percentage at the end of the day most of the time. But sometimes, the customers choose to pay the artists directly, then the artists will pay the percentage afterward. We don't have a "renting chairs" policy in place.

The distribution of the total payment for each job is split between the studio and artists, with variations like 50/50, 40/60, or 30/70, depending on specific conditions (artists receive a higher percentage if the appointment is with their own client). All our artists are self-employed, and as far as I know, they are not VAT registered themselves.

PS:I spoke with HMRC yesterday, and they confirmed that the studio only needs to calculate VAT based on our share, excluding the artists' share, because each party is only responsible for their own tax purposes. However, they mentioned that someone from HMRC would contact me again for confirmation.

I appreciate your support and would be grateful for any additional advice you might have on this matter.

Best regards,

Jeremy535897

This has been briefly discussed before:
https://forums.moneysavingexpert.com/discussion/5687724/tattoo-studio-vat-question
There is reference to hairdressers, who face the same issues, in the VAT manual:
https://www.gov.uk/hmrc-internal-manuals/vat-taxable-person/vtaxper68600 and following pages.

DullGreyGuy

TattooMike said:

As a limited company, the studio covers all business-related costs, including bills, business rates, and other tattoo supplies. However,  we do not sell needles/ink, etc to our artists.

Our payment process involves customers paying at the reception for each job, and artists receive their percentage at the end of the day most of the time. But sometimes, the customers choose to pay the artists directly, then the artists will pay the percentage afterward. We don't have a "renting chairs" policy in place.

The distribution of the total payment for each job is split between the studio and artists, with variations like 50/50, 40/60, or 30/70, depending on specific conditions (artists receive a higher percentage if the appointment is with their own client). All our artists are self-employed, and as far as I know, they are not VAT registered themselves.

PS:I spoke with HMRC yesterday, and they confirmed that the studio only needs to calculate VAT based on our share, excluding the artists' share, because each party is only responsible for their own tax purposes. However, they mentioned that someone from HMRC would contact me again for confirmation.

I appreciate your support and would be grateful for any additional advice you might have on this matter.

Best regards,

It comes down to if it's deemed you or they are providing the services. There are a series of points on https://www.gov.uk/hmrc-internal-manuals/vat-taxable-person/vtaxper69100 which help determine which of it is... it needs to consider both what contracts state but also the general practice on the ground. It's things like if they are contractors providing services then they should be setting their own prices, be able to bring their own supplies etc. If you are setting the price or mandating they use your supplies etc then it sounds like they are your customers and so VAT would apply to the whole fee.