Focus on "rent a chair"

The practice of an established salon 'renting a chair' to a self-employed stylist is fairly common within the hairdressing industry. According to a survey by the Hairdressing And Beauty Industry Authority (HABIA) (Skills Foresight Report 2000), 14% of salons rent out chairs to other stylists. Salons may also rent out treatment rooms to freelance operatives offering beauty treatments.

The independent operative generally pays a fixed monthly 'rent', in return for which he may carry on a separate business within the outlet and make use of the salon's facilities (a separate charge may, however, be made to cover any products used). A proprietor might choose to 'rent out' part of the salon for the following reasons;

• to utilise space which is not otherwise required
• to improve the overall quality of service offered by the outlet; independent stylists may be more highly motivated than employees
• to reduce or avoid employment costs and the burden of employer's liability, without reducing the (physical) size of the salon
• to free the proprietor from management responsibilities, possibly so that he may spend more time actually cutting hair
• to reduce the salon's turnover and avoid the necessity of registering for VAT, without reducing the physical size of the outlet

The practice of 'renting' a chair (along with a package of other services) to a self-employed operative has, however, come under close scrutiny from HM Customs and Excise. It may also result in disputes with the Inland Revenue and the National Insurance Contributions Agency, as well as with employees and even clients. In order to minimise these risks, the National Hairdressers' Federation (NHF) has negotiated with HM Customs and Excise on behalf of the industry and now issues strict guidelines to salon operators who are involved in chair renting.

Central to the NHF recommendations is the fact that a self-employed operative must be truly independent from the salon owner's business, to the extent that he may actually represent a source of competition. The actual definition of independence is, however, open to ambiguity and both salon owners and independent stylists are advised to seek professional guidance before entering into a chair renting agreement. It appears that both the Contributions Agency and Customs and Excise have recently stepped up their efforts to clarify the exact nature of the relationship between parties involved in 'rent a chair' agreements, in many instances focusing on the extent to which the NHF guidelines have been adhered.

Receiving 'rent' payments to cover the use of salon facilities and staff from self-employed operatives may affect the salon owner's VAT position. In 1999 Customs and Excise announced that, while it had encountered 'extreme difficulty' in its attempts to arrive at a legal definition of 'a licence to occupy land', it was issuing clearer guidelines as to what constitutes such a licence.