Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment she has made of the potential impact of the rent-a-chair model in the hair and beauty sector on (a) VAT compliance and (b) overall tax revenue; and what steps her Department is taking to prevent the misuse of that model for tax evasion.

The Government is committed to reducing non-compliance in the tax system and HMRC continues to tackle non-compliance across all areas of the economy, including VAT.

Businesses providing personal care services, including hairdressers and barbers often operate using the ‘rent-a-chair’ business model. This unique but legitimate business model, unless applied correctly, can result in individuals being wrongly classed as self-employed for employment purposes.

HMRC are committed to tackling false self-employment and will investigate evidence that suggests businesses have misclassified individuals for tax purposes. HMRC will challenge businesses that either artificially separate to avoid exceeding the VAT registration threshold or design schemes to reduce the amount of VAT they owe and will take steps to ensure that they pay the right amount of tax.