Saturday, 27 October 2012

Hair Salon VAT Advice

Hair Salon Newbie VAT Advice

If you are a new hair salon owner and want to know more about your position with VAT here is some more information for you in regards to VAT and your hair salon.

What's VAT?

VAT stands for value added tax its current rate is 20% meaning that all services that the hair salon offers must add 20% on in tax. This tax is calculated then paid to the tax man every 3 months or financial quarters. This applies to salon hair straighteners all services and product sales.

Who Pays It

Any business, individual (sole trader) who earns over £77,000 within 12 months you must then register for Vat within 30 days. This is the current rate you need to keep an eye on the rate this may change at any given budget. So you will need sometimes to check the budget which is boring I know but could save you a lot of hassle in the long run.

If you earn under this limit and trade in the UK you should not need to register for VAT but I advise you check at the HMRC web page here and also check with your accountant who should keep you up to date of  any budget changes.

Recording Salon Sales Keeping Records

The key to not getting mixed up with vat and keeping on top of things for the salon is record keeping which for creative types like ourselves is not our strongest point. Plus everybody hates keeping track of sales receipts you just want to get on with what you love which is hairdressing. But as you can read from above if you are near the limit it pays to plan first and get systems in place before the date. As a hair salon there are really busy periods where the whole salon will just be focused on clientele which is a good thing but make sure you set aside some time to organise this with your accountant to get off on the right record keeping start.

Some simple solutions

Some say the simplest ideas are the best but you could just keep it all paper receipt based. So basically you have what's called a part book and every sale you make you write down the service amount and amount of tax the client gets a copy and your salon keeps a copy legally the receipt must state your company name and address plus vat number and a date.

Another solution is some tills can be set up so they handle vat so when you make your end of day till cash up you hit a button and it shows a breakdown of the days takings at the VAT element. You would have already have given receipts to customers the till receipt programmed has all the legal information on it.

Other solutions

Some other solutions include more advanced salon systems that are great for recording sales and managing appointment books and stock these are great for instant reports of vat and sales they can be quite pricey. Although they are systems out there that are what is called open source for taking and managing bookings a quick search for salon booking software open source will bring them up. If you do not want all the hassle you can find providers who have Internet systems along as your salon has a connection you can access there system usually these are at a monthly fee.

Summary

If you are not vat registered keep a close on your takings before you hit the threshold
Plan if you get near think about record keeping discuss with your accountant

If you have not got an accountant and are looking to choose one for your salon watch out for our next article "hair salon choosing an accountant"