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Changes to Hairdressers VAT rules 28/09/12

From 1 October 2012 the rules surrounding the tax liability of chair rentals in hairdressing salons will be updated as HMRC moves to ensure salons and barbers correctly identify the rental as being exempt or standard rated for VAT purposes.

Chair rentals can broadly be categorised as providing a chair with rights of access, or a clearly defined area, to a hairdresser, barber, or stylist alongside “services related to hairdressing”.  Such an area may take the form of a separate room within a salon, or be something as wide ranging as a floor of a building.

The notion of services being related to hairdressing has caused much of the confusion over when a supply is standard rated or exempt.

Services that are related and it is irrespective if these are shared with other people, will include:

  • A hairdresser’s assistant or receptionist/cashier
  • The handling of bookings and appointments
  • Laundry of towels
  • Cleaning of the facilities
  • The making of refreshments.

However, the provision of utilities such as energy and gas, or the cleaning of the communal space within the salon, would not be classed as being related to the hairdressing itself.  Therefore if all of the above services are absent then it remains a supply of land and would be exempt from VAT unless an option to tax is in place.
Splitting the supplies into an invoice for the land and an invoice for related services would not create an exempt supply and a taxable supply; the supply will always take into account if services are being supplied alongside the rental and if so will create a single supply for VAT purposes.

Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
“With the refinements coming into effect as part of Finance Act 2012, taxpayers need to ensure they get the liability correct. As we all know, HMRCs recent approach to penalties has not been particularly kind to the taxpayer, and the new regime is based on compliance and correctness in your tax affairs. However, in some instances slight tweaks in the way arrangements are structured might achieve the same results under the new legislation. If you are in any doubt, call us”

If you need any help and advice with VAT or other tax matters, contact Lavinia Newman Stuart Coleman or Tonmoy Kumar now to discuss how ABDS can help bring their experience to these matters.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:

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