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TonyTax
TonyTax, Tax Consultant
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Tony, My partner owns 12 barbershops (as a limited company)

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Hi Tony,
My partner owns 12 barbershops (as a limited company) in England and she has ~5 out of 60 employee who are “self-employed and work 2/3 days per week” and invoice her on a weekly basis.
They are paid via petty cash as the majority of revenue in the shops is cash. The PAYE employees are also paid in cash on a weekly basis.
She has heard from her accountant she may need to convert them to PAYE but it's not yet clear why this may be required.
Her strong preference is to keep them “self-employed” as they do work for other clients in their spare-time (e.g. hair-cuts from home or working for other establishments) and she’s keen to minimise employer NI costs/holiday pay and the expected salary negotiations by moving them to PAYE.
"Rent a chair" is an option that’s been muted but this would create significant complexity in calculating commission, etc. which she's also keen to avoid.
What guidance would you give to maintain her staff as "self-employed" and do you have a view on why her accountant is worried by the current arrangement?
Thanks, Richard
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Your partner should ask her accountant for clarification of his statement. I'm no longer surprised by stories of accountants not explaining things to their clients who then have to go to a third party for advice or information. Accountants don't bite so people should query anything they don't understand.

I keep up with changes in tax policy and I'm not aware of any HMRC campaign against the self-employed status of hairdressers (and barbers for that matter) who work in a salon owned by an individual. In fact, HMRC have some guidelines which you can read here. The link to that came from here.

As you probably know, it's common practice for hairdressers and barbers to work on a self-employed basis and, in my experience, they have their own clients who frequently visit the same salon and will wait for that hairdresser or barber to be free if they haven't made an appointment. Personally, I don't care who takes a number 1 shaver to my head every three weeks as time spent in the barbers is time wasted for me! I cannot see HMRC challenging the current situation. Many hairdressers move from one salon to another and take their clients with them.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

Many thanks for the quick and full reply Tony.

One follow-up question - what would be the difference (if any, apart from a naming convention) from a HMRC perspective for someone who's 'self-employed' vs. working via a 'rent-a-chair' arrangement?

Thanks, Richard

Expert:  TonyTax replied 2 years ago.
The rent a chair format is more familiar to me but the way your partner does it is fine too in my experience and there isn't really any practical difference. See section 4 here. Those who rent a chair are still self-employed.
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Customer: replied 2 years ago.

Many thanks Tony...thank you for all your help.

Expert:  TonyTax replied 2 years ago.
Thanks.