Commons Sense

House of Commons · Ministers' Questions

Hair and Beauty Sector: Disguised Employment Practices

Tuesday 9 May 2023 · 3 questions

Summarised by AI from the official record, so it can contain mistakes.

Read the full transcript on Parliament.uk

At a glance

Answered 0 Partly answered 3 Not answered 0

Key points

  • Pauline Latham asked about the impact of disguised employment practices in the hair and beauty sector on tax revenues.
  • The Government plans to increase funding for employer-led apprenticeships to 2.7 billion by 2024-25.
  • Margaret Ferrier questioned how Ministers ensure self-employed individuals in the hair and beauty sector understand their tax obligations.

Topics (select to filter)

Questions & Answers

Q1 Pauline Latham Con
Education Taxation Employment
Context

Concerns about employment practices in the hairdressing industry where many operate under a self-employed model to avoid PAYE, national insurance, and VAT. 70% of the hairdressing industry is estimated to be operating under this model which could amount to disguised employment according to HMRC guidelines.

Question

What assessment has been made of the potential impact of disguised employment practices in the hair and beauty sector on tax revenues? The rented chair model allows businesses to avoid PAYE, national insurance, and VAT. This affects apprenticeships as 90% of hairdressers learn through apprenticeships which require proper payment.

Answer from Victoria Atkins

The Government recognise the role of hairdressing salons in training apprenticeships. Funding for employer-led apprenticeships will grow to £2.7 billion in 024-25, helping pay for the cost of training and assessment. Strict criteria exist for employment status.

Partly answered

Not addressed: The Minister did not directly address how VAT rates could be tapered or enforcement of disguised employment rules would become stricter as requested.

How: Is Not Their Choice; There Are Very Strict Criteria

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Q2 Pauline Latham Con
Taxation Employment
Context

The hairdressing industry is estimated to have 70% of its workforce operating under a self-employed model, often as a way to avoid PAYE, national insurance, and VAT. This model may amount to disguised employment according to HMRC guidelines.

Question

Estimates suggest that 70% of the hairdressing industry is currently using a self-employed model to avoid paying pay-as-you-earn tax, national insurance, and VAT. According to HMRC guidelines, these salons might be engaging in disguised employment practices. Since 90% of hairdressers are trained through apprenticeships which require proper payment, how can we ensure that future hairdressers receive appropriate training?

Answer from Victoria Atkins

We recognise the role of hairdressing salons in apprenticeship training. Funding for employer-led apprenticeships will grow to £2.7 billion by 2024-25, aiding costs associated with training and assessment. Strict employment rules must be followed.

Partly answered

Not addressed: The Minister did not address the specific ask about tapering VAT rates or enforcing disguised employment rules more stringently as requested.

How: It Is Not Their Choice; There Are Very Strict Criteria

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Q3 Margaret Ferrier SNP
Business Compliance Women & Equalities
Context

The hair and beauty industry has a high percentage of female entrepreneurs and young people. However, this workforce is at risk due to disguised employment practices that may be affecting their financial stability.

Question

With many women and young people involved in entrepreneurship within the hair and beauty sector, there's a significant risk from disguised employment. How are Ministers ensuring self-employed individuals understand their tax obligations so these groups can continue to thrive?

Answer from Victoria Atkins

We provide guidance for customers to help them understand employment status, and we have agreed guidelines specifically with the National Federation of Hairdressers.

Partly answered

Not addressed: The Minister did not specify concrete steps or timeline on how self-employed individuals would be made aware of their tax obligations as requested.

How: Wonderful That We Have So Many Women Setting Up

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