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HMRC internal manual

VAT Taxable Person Manual

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HM Revenue & Customs
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Particular trades: Hairdressing: To whom do the stylists supply their services, the salon or the customers?

In an attempt to clarify the confusion caused by conflicting tribunal and High Court decisions, in October 1992 we agreed a set of guidelines with the National Hairdressers’ Federation. These guidelines, which are reproduced at VTAXPER69100, list a number of pointers which we accept as indicating a supply of hairdressing services direct from stylist to customer. However, some traders attempt to misconstrue these guidelines and argue that the mere conversion of their employees to self-employed contractors means that the supply of hairdressing services is by the stylists and not the salon. Others may attempt to draw up agreements with their stylists which mirror the guidelines, whilst allowing working practices which are contrary to those guidelines to continue unaltered. Therefore, in order to correctly determine to whom the stylists supply their services, you should proceed as follows.

  • First, consider the written agreement between the salon and the stylists and test this against the guidelines. If the majority of pointers are not met, argue that the stylists, although self-employed, supply their services to the salon, which then makes an onward supply of hairdressing to the customers.
  • If the agreement meets the majority of pointers in the NHF guidelines, frame a set of questions for the trader along the basis of those guidelines, to confirm that the stipulations of the agreement are met in practice. If the agreement has been drawn up since the guidelines were introduced, your first question should be, how have working practices changed since the agreement was drawn up?
  • If the majority of pointers are both met in the written agreement and confirmed in current working practice, accept that the stylists are self employed and supply their hairdressing services direct to the customers.
  • If however, the majority of pointers are not met in current working practice, obtain as much background information as possible, so that you can prove that this inconsistency exists. This might include salon rules, examples of advertising, price lists, and appointment cards. Annual accounts of both salon and stylists are also valuable: a trader cannot portray himself in one way for income tax purposes, but in another way for VAT purposes. In particular, consider whether the stylists declare their gross takings from customers for taxation purposes, or just the net amount received from the salon; whether the stylists show chair rental as an expense; and whether the accounts of the salon show wages as an expense, and chair rental as a receipt. Armed with this information, argue that in practice, the stylists, although self-employed, supply their services to the salon, who then make an onward supply of hairdressing to the customers.

If you intend to argue your case as above, you may use the tribunal case of S Taylor (Machine Tools) Ltd (LON/92/860A), to support your position. In this case, stylists who were previously employees became self-employed, and the trader claimed that the stylists, not the salon, now supplied the hairdressing services. Agreements were drawn up, but were not signed by many stylists, and were not always adhered to. The Tribunal found the agreement to be of little value and instead looked at background evidence such as the personal accounts of the stylists. It concluded that where the evidence was inconsistent and confused, the burden of proof lay with the appellant; he had not discharged that burden and so the appeal failed.