Why VAT cripples your hair & beauty business
Using the template from the “Save our Salons campaign” I thought I would freestyle a little to really outline the issue with government overreach in our profession.
VAT on timed services are unjust and limit growth. My sector believe that hair & beauty should not be in retail sector but health & wellness. Therefore, not only would we be allowed to remain open during lockdown but more importantly we would be VAT exempt. As VAT in this sector is a parasite on competition. I have not seen one argument that justifies why a salon professional should be penalised in the way they have been not only during lockdown but in perpetuity.
The hairdressing, beauty and holistic service industry:
- Contributes *£9.2bn annually to Britain’s economy, employing a workforce of 288,160 people as hair and beauty practitioners in salons and in a self-employed capacity within the UK. (*Source: British Beauty Council / ONS 2019)
- Represents *44,800 VAT and PAYE registered salons in the UK generating £5.4bn annually and employing 189,269 staff. Of this, £3.25bn turnover is generated by 12,300 VAT registered salons who in turn employ 94,686 staff. (*Source: ONS March 2020)
- Generates approximately one-third tax take for HMRC as a proportion of sales (as value is primarily added via the employed workforce)
- Enables flexible working patterns to support family life, increasing economic opportunities and entrepreneurship for women. *88.6% of this sector’s workforce are female. (*Source: Economic Impact Assessment – Hair and Barber Council)
- Provides numerous apprenticeship opportunities to help young people into work
- Underpins the ‘human’ high street; attracting footfall of millions of consumers per day to retail centres, provides a community hub, supports other local retail while promoting personal wellbeing and essential emotional support at times of crisis
In a recent survey of 5,000 salons, 62% were unsure if their businesses would survive past the end of the financial year. It was further reported that 18% were sure they would close. (Source: National Hair and Beauty Federation – Survey 2nd Dec 2020). The consequent social poverty for those who work within them, will be a huge social casualty, with many having to fall back on benefits. Where do you think these newly unemployed workers take their skills? Off the grid and therefore contributing ZERO in tax returns for the recovery process. It’s really that simple. Do nothing and force people underground or do something and bring our industry in line with others in the health & wellness sector.
Another taxing point I would like to make is that time based services cannot mitigate inflation. This is due to the fact that technological improvements do not bring down the time cost of one of our services. Unlike a physical retailer or manufacturer of products. They are armed with a number of options to help preserve their cost-effectiveness and profit margins.
a) Efficiency advances in technology that help lower costs.
b) Exchange expensive ingredients for cheaper ones in order to lower costs.
c) Minimise the gross weight of the product while keeping the price the same.
The above are all tools that a manufacturer/retailer has in it’s armoury to remain solvent. I hope I have clearly outlined this as the main argument as to why Hair & Beauty should not be lumped into the retail sector. I think you could articulate this argument in parliament.
18 months on –
It’s all gone quiet again, the government successfully defended themselves against this debate by referring to help given during the lockdown to “certain businesses” and brushed the longer term and arguably more devastating VAT argument under the carpet.
Once again the leaders in our industry haven’t the capacity in nature or in attention to continue to battle for you. We know we cannot rely on them to take our side in any conflict. This is why GoSalon as a private venture will do more for your business than any industry bureaucrat or lobbyist can. They are simply mouthpieces for the establishment. switch them off, save your money and stop listening to them. They don’t count. Only your clients and family do.