Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment her Department has made of the potential merits of reducing VAT on labour costs to 10% for the hair and beauty sector.

VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. VAT is the UK’s third largest tax, forecast to raise £180 billion in 2025/26.

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.

No VAT is charged on employment costs themselves, as wages are not subject to VAT. VAT only applies where labour is supplied through an agency or another business-to-business service, and VAT-registered businesses can recover any VAT incurred.