How salon owners protect themselves from HMRC
If HMRC come a knocking, what’s the top things they’ll look at, and how (as a salon owner) are you protected?
We’ve put together a summary below on how Salonfrog’s Clients protect themselves with our help; and it is definitely worth making sure that you have the same controls in place:
| What HMRC will investigate:————————— | What HMRC is after:———————————— |
Your controls: How you protect yourself from HMRC——————————————————————- |
| 1. Income | Are you declaring all your income for tax? | i. All your Client sales go through a POS system, which salonfrog independently pulls in to your accounting software.
————— |
| ii. Rental income from your self-employed are invoiced independently by Salonfrog.
————— |
||
| iii. All income and expenditure is through your business bank account, which Salonfrog independently reconciles to your accounting system.
————— |
||
| ————————— | ———————————— | ——————————————————————- |
| 2. Expenditure | Are you overstating your business allowable expenses? | v. Only business expenditure is paid for through your business bank account.
————— |
| iv. All expenditure is supported by adequate paperwork (i.e. you scan every bill into hubdoc), which Salonfrog attaches to the expense in your accounting system.
————— |
||
| iii. All income and expenditure is through your business bank account, which Salonfrog independently reconciles to your accounting system. | ||
| ————————— | ———————————— | ——————————————————————- |
| 3. Payroll | Are you reporting employee wages via RTI (PAYE)? |
vi. All your staff are paid via your payroll system, which Salonfrog independently runs for you; and reports to HMRC via RTI.
————— |
| Are you paying them minimum wage? Big fines if not. |
vii. Staff wages are only paid from your business bank account.
————— |
|
| Are you auto enrolling them when you should do? |
iii. All income and expenditure is through your business bank account, which Salonfrog independently reconciles to your accounting system.
————— |
|
| Are tips being declared and tax paid on them? | xi. Both you, and salonfrog check minimum wages every pay period.
————— |
|
| xii. Salonfrog independently assesses each employee, every month, to ensure they are correctly enrolled, and paying in the legal amount.
————— xiii. You have a Tips Policy, which all staff have signed. Further advice here: https://salonfrog.com/2021/09/29/tips-hmrc-getting-firmer-with-a-new-employment-bill/ |
||
| ————————— | ———————————— | ——————————————————————- |
| 4. Self employed
(chair and space renters) |
Are your self employed actually employees? |
xi. Salonfrog specialises in understanding the salon rental business, the related legislation, and follow HMRC attacks against salons through the courts; then keep you up-to-date with the latest.
————— |
| viii. You have up-to-date contracts with all your self employed; the terms of which are actually followed in real life (e.g. they can come and go as they please). You follow the NHBF/HMRC self employed guidance points (which Salonfrog has distrubuted) and can be found at: https://www.gov.uk/hmrc-internal-manuals/vat-taxable-person/vtaxper69100 ————— |
||
| ii. Rental income from your self-employed are invoiced independently by Salonfrog. | ||
| ————————— | ———————————— | ——————————————————————- |
| 5.VAT | Are you under-reporting the VAT you owe? |
ix. Salonfrog ensures that the VAT relating to all income and expediture is correctly accounted within your accounting system; and that a VAT return is submitted on time to HMRC.
————— |
| iii. All income and expenditure is through your business bank account, which Salonfrog independently reconciles to your accounting system.
————— |
||
| iv. All expenditure is supported by adequate paperwork (i.e. you scan every bill into hubdoc) which Salonfrog attaches to the expense in your accounting system.
————— |
||
| v. Only business expenditure is paid for through your business bank account. | ||
| ————————— | ———————————— | ——————————————————————- |
| 6.MTD VAT | Are you MTD compliant? | x. Salonfrog ensures that you are MTD compliant for VAT; especially that there is the required end-to-end digital link in your accounting systems; and that your VAT return is submitted via MTD approved software. |
| ————————— | ———————————— | ——————————————————————- |
| 7. Records | That you keep a copy of all your records for the minimum required time? |
There are different requirements for different records, for example: for a Ltd company, you must keep records for 6 years from the end of the last company financial year they relate to.
————— |
| Salonfrog keeps all your records for the time you’re with us.
————— |
||
|
————————— |
———————————— |
We don’t keep your records from before you joined us though, so make sure you keep these safe.
——————————————————————- |