Hairdressers

System

I'm helping my friend with her return next week and just wondered if someone can clarify a few things for me.

Miss B is a self-employed hairdresser. Her turnover is less than £64,000, therefore she isn't registered for VAT and does not need to be. Her only income is from the hairdressing services provided to her clients and her expenses are rental for her chair, supplies such as hair dye, shampoo etc. and equipment such as hairdryer, scissors etc. She has no employees and this is her only job.

To complete the self assessment form for the tax year 06/07 seems rather simple - deduct expenses and purchases from income to obtain a gross profit. Deduct her personal allowance of £5,225 from the gross profit and calculate income tax and Class 4 national insurance contributions on this figure.

However, I would like clarification on a few points:

- Class 2 NI Conts are being paid on a weekly flat rate of £2.20 per week, totalling £114.40 annually. Is this all that is due for Class 2 NI conts?

- Miss B uses buses and taxis to travel to and from the salon - can these be classes as a business expense? Or is this seen as personal commuting?

- Purchases such as the hairdryer and scissors can costs £100+ and are used for several years - as this is a simple sole trader, can they just be classed as purchases and offset against the income in the year of purchase or should they be classed as fixed assets and depreciated over several years with the annual depreciation expense being offset against the income? If the latter, this means a P&L and balance sheet would need to also be produced - surely this seems to be too much for a self employed hairdresser?

- When expenses are offset against income should the gross amount of the expense be offset or just the net? I.e. Miss B buys shampoo from a supplier - the price of which includes VAT, however as she is not VAT registered she is not charging her clients VAT, therefore what amount should be recorded and deducted from income to give the gross profit?

- Can any of this VAT be claimed back?

- How should tips be dealt with?

- She has only been self-employed since Dec 2006. Prior to this, she was an employee in a salon. How do I deal with calculating her personal allowance as some of this would have been taken into consideration in her wages for this period? What should I show on the return - just the time she has been self-employed or will I need to include her employed period too?

I would be very grateful for your prompt response.

System

Re:Hairdressers

Hi PP22.

You cannot claim travel to your usual place of work.

Tips have to be declared as income (if there are any).

Scott.

System

Re:Hairdressers

*dup. post*

System

Re:Hairdressers

Thanks - I didn't think she'd get away with that one! :-)

Yeah she does get a lot of tips so guess they will have to be declared then.

Any ideas on the other stuff?

System

Re:Hairdressers

I have PM'd a reply to you.