How to save UK hairdressing

British hairdressing is facing irreparable damage and we need to act quickly – that’s the passionate view of Toby Dicker, co-founder of The Chapel Salons and the Salon Employers’ Association. He shares his concerns for the future, and how he feels we need to act 

I believe our industry is being damaged by some salons flouting their HMRC liabilities and using certain business models for tax avoidance and evasion. As a co-founder of the Salon Employers’ Association and a salon owner myself, I’m worried that British hairdressing is at breaking point caused by some business models using financial loopholes. This is currently flying under the HMRC radar but those caught breaking the law are facing severe legal and financial penalties. Meanwhile, those following the rules and paying the correct tax feel penalised for doing the right thing. 

How is this avoidance impacting our industry? It’s like the fall of dominoes…
With an unlevel playing field one business model does not pay as much in VAT and PAYE, and on top of Covid loan repayments and other rising costs, this means that there is no longer any profit to invest in the future of our businesses. In stark terms this means no more apprenticeships as these salons cannot afford to train people any longer and without a PAYE scheme, salons cannot legally run NVQ training schemes. The medium to long term could be bleak with very little new talent coming into the industry via apprenticeships and ever more pressure to compete for (and potentially poach) each other’s existing staff. NHBF figures suggest that apprenticeships are already 70 per cent down on pre-Covid levels. 

Recent penalties levied by HMRC have been huge for those using dubious models to avoid VAT payments and PAYE Employers National Insurance contributions. The loophole within the hairdressing industry appears when salons remodel their businesses by switching to ‘disguised employment’. In effect, this is through failing to implement self-employment and chair rental schemes correctly and attempting to dodge the VAT threshold and avoid Employers National Insurance (The Salon Employers Association estimates the contribution per annum per full time employee at £20,000 in HMRC contributions). Not only are the salons exposing themselves, but such schemes also leave stylists to fend for themselves, as they are unwittingly flouting tax payments that can take years to catch up with them. And with social media campaigns and influencers sharing enticing stories of freelancing, many are making the move away from conventional employment without knowing all the facts.

 As the Government looks to recover lost revenues there will be no hiding. At the SEA, we want to help spread the word and encourage salon owners and stylists to read up on the rules, comply and help us all turn the tide now. Information can be found here. It’s clear to me that most salon owners and stylists don’t even know they are breaking the rules because there is so little information being properly shared. Urgent clarification is needed and that is what we are calling for at the SEA. 

Some salon owners feel they have no option but to change their business model to self-employment or risk having no business at all. These are the people we are campaigning for. Our membership now includes 1,400 salons and 15,000 employees, and we solely represent PAYE and VAT paying salon owners.   

This isn’t about simply bashing all self-employment businesses. We believe in opportunities for all within the industry and want all business models to flourish. However, the current tax imbalance makes this impossible, and worse, it’s compounded by the fact that hairdressing is already paying more VAT than any other business on the high street.   

Our future depends on a new generation undertaking approved apprenticeship schemes within PAYE salons. These are the only workplace settings where these vital programmes can be legally offered, where skills are crafted and the crucial bridge is filled between college classes and real-life learning, not to mention obtaining vital interpersonal and client care learnings. Without helping PAYE salons thrive and survive through fairness and parity, the next generation and future-skilled pool of hairdressing will dry up, the long-term consequences of which will be devastating. 

Alongside the closing up of HMRC loopholes, we are lobbying the Government to reduce the VAT on hairdressing services to create a split rate (reduced on services where tax cannot be recouped). They successfully instigated this in Ireland more than a decade ago. Right now, we’re paying more than three times the average tax of any business on the high street (36p to 40p per pound vs the 12p for some other high street businesses, such as jewellery or traditional retail. Quite simply we as hair salons and stylists contribute labour taxes and almost the full amount of VAT on every service we sell. In contrast, the traditional retail model relies on stock to add its value, so the labour taxes are around 10 per cent of our salon model, and retail also claims back more than half of the VAT it collects. Roughly speaking salons contribute more than 33 per cent in these two taxes alone, while retail would be contributing less than 15 per cent. 

It’s time for our industry to unite, stand together as professionals and seek ways to improve our standards and services for the greater good. A simple, reliable, dependable way could be to adopt a State Registration Scheme as seen in the gas Industry with CORGI registration. The regulation would grow trust and respect while the benefits and support would extend past tax and legal issues. We’d have full representation and a voice in Parliament, allowing us to collectively create a better future for us all.  

To survive and chart a successful future, it’s time to change. Let’s start by levelling up taxation. We’ll then be able to stand together, united to create a really bright, thriving future. The pandemic revealed just how valued our industry and services are by our customers. But there are fewer customer visits than there were in years gone by, so we need to value ourselves more if we are to make a living. Let’s lean into that and bring back the pride and respect. There’s no better time to start…  

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