At the time of writing, I have no idea what’s in store in the Budget. I hope that now we have our very own Personal Care sector, recognised by Government, that we have finally been taken seriously as the labour-intensive industry that we are and that we are looking forward to a cut in VAT to 5% as enjoyed by the hospitality sector since July 2020.
That would at least help us recoup some of our losses when we can finally reopen our doors and will mean that those paying VAT (who are more likely to be employing staff) are 15 pence in the pound better off. It simply wasn’t fair that we weren’t able to benefit from the VAT cut when it was first introduced, especially as few hospitality businesses seemed to pass the reduction on to the end-user (did you see any menu prices drop by 15%? No, me neither) and they benefited greatly from the Eat Out to Help Out scheme, whereas we got nothing.
“I would really like to see a unification of the hair and beauty industry and I know I am not alone in this”
Every month that we cannot trade, those who employ staff are running up debt. Furlough is not free and incurs costs (such as employers’ National Insurance contributions) and has corporation tax implications too. Couple this with having to pay rent on bricks-and-mortar premises and every day is like a ticking time bomb seeing salons fall further and further into the red. Although some landlords have issued rent-free periods or have at least reduced rents, the data we’ve gathered from saveoursalons.co.uk (SOS – there is a reason we called it that!) tells us that 80% of you have had little or no support in the way of rent reductions.
Not only have 90% of salon owners gone further into debt in the crisis but almost two thirds have considered closing their doors permanently. Frighteningly, 90% said they would be losing employees in the future.
Having got involved with some of the groups who have the ears of the MPs, it is evident that the decision makers see our industry as fragmented. We are splintered into salon owners who pay VAT and employ staff, and PAYE and self-employed contractors who either work freelance or work in salons and largely stay under the VAT threshold of £85k. A recent NHBF study into the sector was illuminating in illustrating just how diverse we are. We all know that we are unregulated, but the vast array of different scenarios working in the hair and beauty business showed was staggering.
Of course, all the time there is a VAT threshold there will be those who try and remain under it to avoid paying VAT, regardless of what industry they work in. Our sector is no different. But now is the time to look at the long-term future of our sector in order for it to survive. I would really like to see a unification of the hair and beauty industry and I know I am not alone in this.
If the threshold was abolished, I am sure we would all benefit from the more level playing field it would create. If everybody in the industry’s entirety was paying 5% VAT, the revenue would recoup some of what it would lose by reducing the rate on services to 5%. Creating this split rate would mean that we would then only pay 20% on retail and goods sold, like other retailers do. If we were granted the 5% rate on services, those who are currently not VAT registered would then re-set their prices, inclusive of VAT, and put them up by 5% to cover the VAT payable.
Treating the high street and online differently would be the final piece in the puzzle. If those who require premises to trade were entitled to reduced rates of corporation tax and those who only sell online and don’t have the overheads of bricks and mortar paid a higher rate, there would be a benefit to retailers who are probably, as I write, considering leaving the high street for good.
I’m no tax expert or economics guru, but it makes sense to me. If you agree please visit saveoursalons.co.uk and have your say. Please do complete the survey too so we can deliver some real grassroots evidence from the people actually working at the coal face to the powers that be. PB
Hellen Ward is managing director of Richard Ward Hair & Metrospa in London, one of the most profitable independent salons in the UK. She is beauty ambassador for the National Hair & Beauty Federation (NHBF). Send your feedback to email@example.com