Asked by: Andy MacNae (Labour - Rossendale and Darwen)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what steps she is taking to tackle tax evasion in hair salons.
Answered by James Murray - Exchequer Secretary (HM Treasury)
The Government recognises that sometimes businesses do not declare all of their income and thereby conceal their true earnings. We are committed to creating a level playing field for all, by ensuring that everyone pays the right amount of tax at the right time, to ensure trust and fairness in the tax system. Most taxpayers pay what they owe, but a small minority fail to register with HMRC or only declare a portion of their earnings. This small minority deprive our vital public services of funding, affect fair competition between businesses, and place unfair burdens on everyone else. It is vital these revenues are collected to fund our essential public services. Closing the tax gap and making sure that more of the tax that is owed is correctly paid, is one of the Government’s top priorities for HMRC.
HMRC is making it increasingly difficult for businesses to hide their earnings and have an extensive range of powers, including information gathering powers, that help build a picture of risk and identify those who are trying to abuse the system. HMRC’s approach to tax evasion aims to tackle current non-compliance and change future behaviours. Their activities include national campaigns and specialist task forces that incorporate intensive bursts of activity in targeted sectors, such as the hair and beauty sector, and locations across the UK. This includes providing customer education highlighting the importance of keeping accurate records.
We recognise that some customers can find it hard to understand their tax obligations, so HMRC are developing and testing new educational material to better explain the rent a chair model. This is planned to be ready for publication on GOV.UK in the spring.
Asked by: Andy MacNae (Labour - Rossendale and Darwen)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what steps she is taking to support the hospitality industry; and whether she has made an assessment of the potential merits of amending VAT for that sector.
Answered by James Murray - Exchequer Secretary (HM Treasury)
As set out at Autumn Budget 2024, the Government intends to introduce permanently lower business rates for retail, hospitality, and leisure (RHL) properties, with rateable values below £500,000, from 2026-27. Ahead of these changes being made, the Government has extended the current RHL relief for one year at 40 per cent up to a cash cap of £110,000 per business, and frozen the small business multiplier.
VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. Tax breaks reduce the revenue available for vital public services and must represent value for money for the taxpayer. Exceptions to the standard rate have always been limited and balanced against affordability considerations.
HMRC estimate that the cost of a 5 per cent reduced VAT rate for accommodation, hospitality and tourist attractions would be around £10 billion this financial year. If the scope were also to include alcoholic beverages, the cost would be approximately £3 billion greater.