BEARD TAX, so what is it all about ?

A BARBER has waged war on free facial hair by calling on Government to implement a beard tax.

“I’m trying to raise awareness of the ridiculous state of tax in the hairdressing industry,” explained Mr Kent.

I have written to government for many, many years to raise my concerns over taxation in the hairdressing industry. All the responses where pretty much the same, we won’t change anything!

I employ all my staff who are on PAYE, I pay NI, Pension contributions and most importantly 20% Hair tax or VAT on all my turnover. A £12 haircut consists of £10 plus hair tax or VAT at £2. The crux of the matter is the majority of hairdressing salons now operate with self employed contractors, removing salon owners responsibility to collect PAYE, NIC, pensions and of course the normal rate of VAT.

I currently employ 60 staff and pay VAT at 20%.

The VAT results in a fifth of my turnover being taken as I have little in the way of purchases. It is effectively a tax on turnover in the hairdressing profession.

The current VAT threshold is £83000. Many hairdressing businesses on the High St turnover above this figure but avoid registration by claiming their staff are self-employed.

I refer you to HM Customs guideline in budget 2012 marked link 1 at the end of this document.

In this document rules were brought in to tighten up the VAT status of salons claiming their staff are self-employed. This legislation does not appear to work, and where it does, results in VAT being halved. This is due to salon owners charging rent based on a stylist’s turnover. For example a stylist is on a chair rental contract based on sharing earnings on a 50/50 basis. Let’s say the Stylist takes £1000 in a week. The salon owner would then charge the stylist £500 plus VAT, the stylist’s income would then be £400, obviously below the VAT threshold and VAT free. This results in a reduced rate of VAT being charged in salons following the law, most of which do not. This in turn represents a grossly unfair advantage against salons who employ their staff paying VAT@20%, National Insurance, Holiday Pay, Pension contributions etc, etc.

For a salon claiming they are turning over below £83000, what incentive do they have to grow and employ more people?  You will notice that there are not many chains of Hairdressers who are not franchises or hire self-employed stylists. This is partly due to business owners not wanting to exceed the threshold. For example if they turned over £100k they would have to pay £20k in VAT, so what is the point of expanding?

Many of my salons turnover below the threshold but are taxed at 20% because of the groups turnover. Now do you see my problem?

Lets create a level playing field where we all pay the same level of taxes!


Santa's beard attracts highest tax rate!

Santa’s beard attracts highest tax rate!