More than 300 hair and beauty salon owners and employees from across the country gathered outside the House of Commons to demand urgent tax reform.
Under the banner ‘Save Our Salons’, the protestors – many of whom were wearing black cutting gowns or black uniforms, cutting hair and giving beauty treatments – urged Chancellor Rachel Reeves to sort out the structural flaws in the unbalanced tax system that’s having a disproportionate impact on the industry, and cut VAT on labour costs from 20% to 10% in next week’s Spring Forecast.
“What differentiates ours from other sectors calling for help is that a recently published report by The British Hair Consortium and CBI Economics highlighted how introducing a split rate for VAT makes fiscal sense for a government searching for ways to balance the books”, said Toby Dicker, co-founder of the British Hair Consortium and organiser of today’s event. “Our industry has been ignored for years and we’re urgently calling on the Government to correct decades of mismanagement.”
“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.”
“No where else on the high street could two businesses – literally trading side by side – in the same sector operate two completely different tax models, where one is contributing more than double the tax than the other,” said Collette Osborne, a hair salon owner based in Nottingham. “Imagine two restaurants where one is paying half the tax of the other because they made their workers self-employed. This splitting of revenue at worker level creating an unlevel playing field simply wouldn’t be allowed.”
The CBI Economics report based on responses from over 2,000 salon owners and professionals highlighted how:
- 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 VAT and NI payments.
- 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 hugely cost positive and potentially reverse the decline in VAT registrations.
“Ireland has recognised this and dropped its VAT on labour intensive businesses in hairdressing and hospitality to nine percent,” said Gareth Penn, Registrar of the Hair & Barber Council.“ The change is working – new salons are popping up and paying tax while workers are also benefiting from improved employment rights.”