HMRC has released new guidance for hair and beauty services following engagement from the British Beauty Council and other stakeholders

Whether people working in a salon, mobile freelancing, working at home in clients’ homes, or renting a chair in a salon that’s owned by someone else, hair and beauty professional services offer their services in a myriad of ways. 

After many years of engaging with the Government on the industry’s diverse business models, HMRC has published new employment status guidance for the hair and beauty sector. 

The aim of the guidance, co-created in partnership with the British Beauty Council and other industry organisations, is to help salon and business owners across the UK identify different employment types to ensure they are remaining tax compliant. 

This comes as the Chancellor of the Exchequer, Rachel Reeves, confirmed additional funding for HMRC to crack down on tax evasion during the Government’s Spring Statement in March.   

Whilst self-employment allows people and businesses to adapt to shifts in the sector and potentially achieve greater balance, debate around the merits of self-employment versus traditional employment in the sector has been long running.

In particular, self-employment in the service sector has been linked to ‘disguised employment’: a situation in which self-employed workers are subjected to the same or similar working conditions as traditionally employed individuals. 

The new guidance makes working out employment status simple. It sets out key areas of focus for working out whether you qualify as employed or self employed, including:

• Working hours: whether these are set by the business or by an employee.
• Daily tasks or duties: whether these are set by the business or up to individual employees.
• Payment: whether it is taken by the salon or by the employee.

If you are self-employed, it is essential that you register for Self Assessment, report your income to HMRC, and pay tax (including VAT where applicable) and National Insurance contributions on your income.

If you are a salon owner you should complete VAT returns on top of any other tax that you pay.

On the other hand, if you are employed – you work for an employer who decides your pay, working hours, and daily tasks – then your employer is responsible for ensuring that tax is deducted correctly from your take home pay.

The Council is dedicated to raising the reputation of the industry, and ensuring those working within it are doing so legally and with full transparency is key to this. Providing clarity on employment types for those who work within businesses is essential to ensuring that businesses are not over or under paying tax, and avoid financial penalties.

To learn more about employment rights and responsibilities, ACAS provides free, impartial and confidential advice and can be contacted here.

To read more about Government guidelines on employment and self-employment, click here.