The Chancellor’s Spring Forecast is due on 26th March and our industry is clinging to the faint hope that hairdressing services providers might just benefit in some way. The British Hair Consortium, which represents 50,000 UK hairdressing professionals, is saying that the Government must urgently halve the VAT salons pay on labour costs to 10% to help them overcome the existential crisis they’re facing.
The analysis commissioned from the independent consultancy CBI Economics, based on responses from over 2,000 salon owners, professionals and hairdressing services providers, highlighted the following points:
- The sector is far more labour intensive than most other high street businesses with limited chances to reclaim VAT costs
- This labour intensiveness creates an unlevel playing field, with taxes impacting the sector three times as much compared to other high street operators
- VAT-registered businesses are at a disadvantage with the rising levels of ‘disguised employment’
- Where contractors are hired to avoid VAT and NI payments, this creates the unlevel playing field where employers often contributing more than double the tax (123% more) than the disguised model
- By 2027 there may be no new apprenticeships offered and direct employment could plummet 93% by 2030
- The shift to self-employment has coincided with a decline in overall sectoral employment which may have cost the Treasury £2.4bn in VAT receipts alone since 2009
- Cutting VAT on salons’ labour costs would be a hugely positive move in terms of costs and potentially reverse the decline in VAT registrations
WATCH THE SALON EMPLOYERS’ ASSOCIATION VIDEO HERE:
“Our industry has been ignored for years and we’re calling on the Government to correct decades of mismanagement,” comments Toby Dicker, co-founder of the British Hair Consortium. “Most owners haven’t had a pay rise in many years and simply can’t consider expanding their business, let alone take on an apprentice. A ‘one size fits all’ tax system doesn’t work and has created an unlevel playing field. Increasing numbers of owners are either closing their salons or changing their employment practices and are renting chairs to contractors just to survive. This report shows how cutting VAT to 10% won’t cost the Government a penny. It would save salons across the country and ensure the future of our industry which sits at the heart of the high street.”
Ireland has recognised this and dropped its VAT on labour intensive businesses in hairdressing and hospitality to nine percent. The change is working – new salons are popping up and paying tax while workers are also benefiting from improved employment rights.
Laura Geary, Director at Headmasters, one of the UK’s biggest salon groups and one of the largest providers of apprenticeships in the industry says: “The changes from the last Budget have made it very hard for salons to continue to offer the benefits of employment and we will certainly not be able to take on as many apprentices going forward. This will kill the future of our industry.”
What can salons do to help?
The British Hair Consortium is desperately urging the industry to take the following action:
- Head to the BHC website and everything you need is there.
- Download the templated letter
- Personalise the letter where indicated
- Download the report
- Look up your local MP & email them the letter, report and link to the video that is on the website