The Case against VAT in Hair & Beauty. UK

Okay, bear with me on this one. This blog post was inspired by a chat I had with main man Joe on the Salonomics podcast. The main chat was around inflation and VAT. Why our industry does not seem to understand how both of these things act as an annual pay cut for everyone working in the Hair & Beauty sector.

IF

VAT = Definition A value-added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed.

WHY are we open to the idea of a consumption tax?

History = Germany and France were the first countries to implement VAT, doing so in the form of a general consumption tax during World War I.^[5] The modern variation of VAT was first implemented by France in 1954 in Ivory Coast (Côte d’Ivoire) colony. Recognizing the experiment as successful, the French introduced it in 1958. although German industrialist Wilhelm von Siemens proposed the concept in 1918. Initially directed at large businesses, it was extended over time to include all business sectors.

The amount of VAT is decided by the state as a percentage of the price of the goods or services provided. As its name suggests, value-added tax is designed to tax only the value added by a business on top of the services and goods it can purchase from the market.

“it can purchase from the market.” is seemingly the key part of the definition. Is a haircut a good that can be purchased from the market?

Goods that are imported from a VAT-free country into another country with VAT will result in no sales tax and only a fraction of the usual VAT.

https://www.gov.uk/guidance/rates-of-vat-on-different-goods-and-services

Tax is such a complicated issue and I understand why people just get on with it and pay it. I also understand those that work off the grid in order to avoid it. However with the national campaign forged by the elite salons and their PR companies. We may as well jump on the band wagon. And while we are here point out the ridiculousness of this TAX in our industry.

It seems to me that we get lumped in the retail bucket when it suits them. As far as I am aware there has never been a campaign raised by anyone to ask the question “Why Do I have to pay VAT on my hair service?“

This VAT cannot be claimed back by Hairdressers/Barbers and Beauty Pro’s and you could even argue that Self Employed and Freelance hairdressers essentially pay this tax on behalf of the salons they work out of. I wrote a blog last year looking into the practice of removing VAT before your commission was worked out. I decided it was a scam propagated by salon owners. You can see that blog here.

Let’s look at the Retail sector. Across the board there is a 20% VAT rate – Hair and Beauty are in this sector. Why? If the definition is “added value to a product available on the market.” Who is the market in this context? The hairdresser? or the client?

Health and Wellbeing are exempt from VAT so how can we argue the point that we are in the wrong sector? We have to illustrate that VAT kills growth in our industry. Of course that’s very difficult. And probably the reason why nobody has. The other option is to shrink your business turnover so that you don’t have to pay it. Which is the easiest option to you?

When you put VAT into context of time. You work almost 3 months per year for the Government. True. Do the maths. What is your tax contribution.

Let’s argue that we are selling our services based on Time and therefore we should be exempt like a financial advisor that sells financial products during an hour meeting or like an insurance salesman is exempt from selling a financial product or like a Gym sells access to its Gym equipment is exempt from VAT. If the Gym argument is well it’s good for you? then find me a hair or beauty service that doesn’t make you feel good afterwards? Healthy mind = healthy body.

Inflation is another invisible tax that we are exposed to unjustly in my opinion for example look at this mars bar – to mitigate inflation a product company can reduce the weight of a product and become more efficient producing it. When you work in a time based service this is another TAX that we cannot free ourselves from. It’s no wonder the average wage for a hairdresser has gone down in terms of purchasing power. I wrote an important blog about this here.

It’s Time.

Stop burying your head in the sand. If you want to be able to work and trade either on the high street or in a super salon. Make a stand now otherwise these taxes will suffocate our industry to death. Stop begging the government to help us. They won’t. The opportunity is here now. You can adapt your business today or your business can be ignored in the next national crisis? It’s up to you.

P.S

Some of these issues can be countered by the simple act of using GoSalon.
GoSalon helps you generate a new revenue stream while at the same time cutting a lot of these expensive software costs that you ‘believe’ your business relies on. Stay tuned as I do not want to reveal everything now but the future for freelance & self employed hairdressers, Beauty Professionals and Barbers is very effing bright.