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Hair and Beauty Sector: Disguised Employment Practices

Volume 732: debated on Tuesday 9 May 2023

6. What assessment he has made of the potential impact of disguised employment practices in the hair and beauty sector on tax revenues. (904819)

As the Minister responsible for His Majesty’s Revenue and Customs, may I wish His Majesty the King and Her Majesty the Queen a very long and successful reign and say that its 63,000 members of staff will be proud to try to help His Majesty’s Revenue and Customs, as they are bound to do? The Government are aware of concerns about employment practices in the hair and beauty sector. The concerns are largely focused on the so-called rented chair model, which is a long-standing practice and a legitimate alternative to employing stylists, provided that the parties involved follow the relevant rules. The Government are committed to tackling disguised employment and HMRC will consider any evidence suggesting that businesses have misclassified individuals for tax purposes.

It is estimated that 70% of the hairdressing industry is currently operating under a self-employed model to avoid pay-as-you-earn, national insurance and VAT. According to His Majesty’s Revenue and Customs guidelines, those salons often amount to disguised employment. The problem is that all apprentices—and 90% of hairdressers learn through apprenticeships—must be trained in salons that pay their tax, an increasingly unattractive model. Will the Minister consider how we can taper VAT rates or enforce disguised employment rules more stringently to ensure that we have appropriately trained hairdressers in future?

I am sure that I am joined by all Members of the House in thanking my hon. Friend for her interest in ensuring that we have hairdressers in 15 years’ time. We recognise the important role that hairdressing salons play in the education and training of apprenticeships. Indeed, funding for employer-led apprenticeships will grow to £2.7 billion in 2024-25, which will help to pay for the cost of training and assessment. However, she is quite right to pinpoint the need for those participating in the hairdressing industry to ensure that they are following the rules correctly. It is not their choice; there are very strict criteria, and they must make sure that they follow them. I very much look forward to discussing this in further detail with my hon. Friend later this week or next week.

The hair and beauty industry is characterised by a high percentage of female entrepreneurs and young people. However, that workforce continues to be at risk of disguised employment. What steps are Ministers taking to ensure that self-employed individuals are aware of their tax expectations so that women and young people can continue to thrive in that sector?

Is it not wonderful that we have so many women setting up their own businesses and taking that step into entrepreneurship? [Interruption.] Oh, there is chuntering from those on the Labour Benches; they seem to disagree. The hon. Lady is right that we should ensure that we help entrepreneurs, whether male or female, to understand the rules when it comes to tax. That is why we provide guidance and support for customers to help them understand employment status, and we have agreed guidelines specifically with the National Federation of Hairdressers to help it communicate with its industry about which rules apply to which hairdressers.