T: 0131 341 4250|E: andrew@salonfrog.com
T: 0131 341 4250|E: andrew@salonfrog.com
The NHBF has been invited to the Treasury to talk to government policy officials about self-employment and also the black economy.
The NHBF says
“We hear a lot from Members who employ their staff about the difficulties they face competing with salons who have self-employed people working in them. The differences in costs and flexibility have advantages and disadvantages.”
“The Conservatives and other political parties have announced that they want to improve the rights of people working in the ‘gig’ economy and will clamp down on ‘bogus’ self-employment. Potentially, this could affect the future of self-employment in our industry.”
“We need to be confident we are representing your views ahead of these meetings, so please take 10 minutes to fill in this survey before Wednesday 5 February 2020.”
Salonfrog completed the survey and urge you to complete it as well, so that the NHBF can go armed with all the facts to Downing Street:
With the election only days away, Salonfrog has compared the manifestos of the main 4 parties to see how their policies would affect the businesses of salons and barbershops. For this, we’ve ignored Brexit and Indi ref 2 and instead concentrated on the tax implications of each:
In summary:
| Currently | Conservative | Labour | SNP | Lib Dem | |
|---|---|---|---|---|---|
| Corporation Tax | 19% but by law will reduce to 17% Apr 2020 | Keep at 19% | Increase to 21% (or 26% if income > £300k | - | Increase to 20% |
| Income Tax | England, Scotland, Wales set their own but basic around 20% | No change | New 45% tax for income > £80k | No change | All rate increase by 1% |
| National Insurance | Eee:12% over £8,632 threshold Ers:13.8% over £8,632 threshold | Raise threshold to £9,500. Increase employment allowance £3k->£4k | - | Devolve to Scotland. Decrease Employers NI. Increase Employment allowance. | Review the whole NI system. |
| Dividends | First £2k - 0% Basic rate 7.5% | No change | Increase to income tax rates! Around 20%. Withdraw £2k 0%. | - | - |
| Contractors | Review tax treatment | Review tax treatment | Review tax treatment | Review tax treatment | Review tax treatment |
| VAT | 20% Threshold £85k | No change | No change | No change | No change |
| Business Rates | Review | Review | Devolve to Scotland and review | Replace with commercial landlord tax | |
| NLW | Age 25+ £8.21ph | Increase to £10.50 over 5 years. Reduce age to 23 (then to 21 by 2024) | Increase to £10 from age 16 in 2020 | Increase to £10 minimum | To review |
Although it may seem a long way off for some, you should check your NI Qualifying Years regularly. We tell you why & how here.
Background
To get the full basic State Pension when you reach retirement age, you need to have earned 30 “qualifying years” of National Insurance contributions or credits; and to get the new State Pension you’ll need 35 years.
A Qualifying Year is credited to you when you pay enough national insurance during that year, or for some reason you can claim a ‘free’ credit for that year.
If you have fewer than 30/35 qualifying years when you retire, your basic/or new State Pension will be less than the full rate (currently £129.20/£168.60 per week). However by checking your position regularly, you can ensure you earn the required 30/35 years (or at least close to it). For example, you might be able to top up ‘missing years’ or claim ‘credits’ to add to your total score – but there are time limits to do this. So read on…
What to do:
1st: Check what you have
Check how many years’ credits you have. You can do this on line and you’ll need you Government Gateway user ID:
https://www.gov.uk/check-national-insurance-record
2nd: See if you have any ‘free’ credit years you can add on
You may be able to get National Insurance credits even if you’re not paying National Insurance, for example when you’re claiming benefits because you’re ill or unemployed, or have taken time off to raise children. Have a look here to see if you can claim any missing years:
https://www.gov.uk/national-insurance-credits
3rd: Decide if you need to plug the gap
If you have any gap years, decide whether you want (or need) to make additional contributions or claim credits to plug the gap.
For example, if you already have 26 credit years and you plan to work for at least another 4 years, then there’s little need to plug any gaps. However, if you have 10 credit years and only plan to work for another 4 years, it may be worth catching up.
You can make voluntary contributions to plug the gap, but you need to check your eligibility here:
https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions
Final points
Remember to tell your staff, family and friends to do the same! Feel free to pass them the link to this Article.
Feel free to contact us should you have any questions.
Andrew has been a member of the Institute of Chartered Accountants for 20+ years, and this week received his Business & Finance Professional status: so he can now put ‘BFP’ alongside his existing ‘ACA’ letters after his name.
We thought it was worth celebrating!
We all know that having a will in place is a no brainer but as it transpires, half of the adults in the UK don’t get round to making one. A story reported in the FT recently definitely highlights the mess you can get into if you die intestate.
Perhaps we need such shocking news stories as a ‘conversation starter’ to prompt thinking about the division of our assets after our death: whether we have children, or not.
A shocking case was reported in the FT of two step-sisters who were arguing over which of them should inherit their late parents’ house. The elderly couple had been found dead in their home, and it was not possible to determine who had died first.
The situation was complicated because the father had not made a will, and his younger wife had made no provision in her will for her step daughter. If the wife was deemed to have died first her share in the home would pass to her husband. Under the intestacy rules his estate would pass only to his daughter and not to his wife’s daughter.
If the husband died first, the wife would inherit the property and it then would pass only to her own daughter under her will.
The Court decided that the Law of Property Act 1925 should apply, which determines that the elder of the two is deemed to have died first. The wife’s daughter thus inherited the entire property to the exclusion of her step-sister.
This gordian knot would have been easier to unwind if both individuals had made wills with express provision for both daughters.
You can put your own will together, or even buy a DIY will from amazon; and this might be ok if your will is simple. But generally it is recommended to instruct a solicitor to do this.
I was looking at an interesting article on how to get a solicitor-written wills in return for a small charity donation, which may be of interest to you:
With over 19 years’ experience in the industry, Nicola Smyth is an international award winning hairdresser who now has 4 amazing salons (in Leamington Spa, Warwick, and Kenilworth) along with co-owner Dan Smyth Humphriss, who looks after the business side of things.
Salonfrog’s Andrew chatted to Nicola and Dan backstage at Salon International, before joining them at their one hour workshop on how to make money from selling retail stock. Some of what they spoke about was quite different to what we’d seen before in the hair & beauty industry and very refreshing to say the least!
Here’s what Andrew had to say:
First off, I have to say that Nicola and Dan exude energy and it’s obvious how enthusiastic they both are!
I didn’t have too long before they presented their workshop but while chatting to them, two facts became very apparent:
#1 Nicola was adamant on how important the awards that they had won had been to the growth and success of their salons.
#2 Dan agreed but added that they’d got to where they are by focussing on what really matters and also by not being too greedy; explaining that yes, you need to make profit but you also need to treat your staff right, ensuring a share of profits are passed to them while also putting money back into the business. Both Nicola and Dan explored this philosophy more in the workshop.
And finally, it came to light that they both plowed every penny they had into their business in the beginning – even using their honeymoon money!
Then I settled down for the workshop.
Both Nicola and Dan are really friendly and I saw how they welcomed every guest into their workshop personally as each arrived.
Nicola opened by running through the history of their salon business and the multiple awards it had won before moving onto the subject of how to maximise the money you make from selling retail. Nicola indicated the value of £ retail sales to their business, which I won’t print here, but left most of the room speechless, including me!
With that in mind, Nicola explained that to get those sort of retails sale, you need to have 3 key pieces lined up:
Nicola and Dan expanded on each of these pieces, explaining the issues most salons face by not having them in place and how their own salons also went through the same journey to get where they are now.
The rest of the workshop really nailed down these 3 things – often from quite a different approach to many salon owners.
I won’t say much more as Nicola runs courses on how to do all of this – and she can tell you in a classroom setting over half a day better than I can in a blog! But here’s just 5 of the many points they covered which will give you an idea:
An hour goes quickly
I’ve just touched on some of the points of the workshop. Nicola and Dan have a refreshing and confident approach to retail, and they have the proof that it works. To finish off they conclude in their own modest style that it’s nothing other salons couldn’t also replicate.
How to contact Nicola and Dan
If you want to learn more about selling retail, Nicola or Dan would be happy to chat to you about how they can help with bespoke courses either at their salon, or at yours. Simply contact them here:
With over 200 salons and 1,400 employees, Supercuts went into administration this week. We look at why this has happened, what a CVA is, and what administration means.
Background
Supercuts (which is owned by Regis UK) has been struggling for the last few years. Last year, Regis had warned that a “perfect storm” of factors (including falling customer numbers and higher wages) had hurt the business, leading to “cash flow issues.”
On top of this, the rise in the legal minimum wage rate, the apprenticeship levy, higher business rates and an increase in the cost of product as a result of the Brexit-led fall in the value of the pound, would also be likely factors.
In 2017, Regis UK was sold by its American parent to global salons operator called the Beautiful Group, which is backed by a US private equity firm called Regent. Its most recent accounts show the business making a loss of £5m on sales of £65m in 2017.
CVA
To battle against its issues, the company embarked on a restructuring process called a company voluntary arrangement, or CVA.
With the CVA law on its side, it demanded its landlords to reduce their rent bills, including asking the landlords of more than 20 of its salons for free rent, as well as cuts to all the others.
Two of the four largest land owners in the UK (British Land and Hammerson) has mounted a legal challenge to overturn the company’s CVA and the outcome of this is yet to be decided. Rob Harding, joint administrator at Deloitte, said:
“Unfortunately, these trading challenges, coupled with the uncertainty caused by the legal challenge to the CVA have necessitated the need for an administration appointment. This is in order to provide protection for the business whilst restructuring and sale options are fully considered and explored.”
Administration
Administration (which is different to liquidation) is a process of creating a legal ringfence around a struggling, insolvent company to prevent further threats to its creditors (which includes the salons’ landlords, its suppliers and its staff).
To do this, it appoints an administrator (in this case the accountancy firm Deloitte) who will need to establish whether the company could remain viable (i.e. could become profitable again). Deloitte will then establishes a timeframe for the administration and implement further restructuring measures to improve the company’s position (which in this case includes looking for a buyer).
Update | what happened in the end
We’re happy to report that the Supercuts and Regis hair salon brands have been rescue after a deal was struck with the administrators.
The Bushnell Investment Group (led by the entrepreneur Lee Bushnell) made an investment in support of a management buyout by agreeing to buy 140 of the 200 outlets. The deal involved the closure of 60 sites (although these had all either shut during the administration or had since been closed, with the loss of 200 jobs) but under the deal, more than 1,000 workers have been retained.
Matt Cowlishaw, joint administrator at Deloitte, said: “We are pleased to have concluded the sale and for being able to preserve a significant number of jobs at two well-known brands.”
The format of what we can expect on 6 November is understood to depend on whether a Brexit deal is agreed, or not.
In the event of a no-deal Brexit, it is anticipated that there will be just a simple economic statement on 6 November.
The announcement of the Budget date by HM Treasury indicates that the economic statement would be a precursor to a Budget in the following weeks.
Read more about getting ready for a no-deal brexit here: Brexit | is your salon or barbershop ready?
Here’s Salonfog’s quick-start guide to getting ready for a no-deal Brexit; outlining a variety of areas that could impact your salon or barbershop, and so help you start preparing.
While there is still no certainty around what Brexit will mean, salon and barbershop owners need to have contingency plans in place that are sufficiently flexible to cope with a variety of possible outcomes. These considerations reflect “no deal” being reached, but may also be relevant in other scenarios.
Here’s our top 5 considerations:
1. GDPR
If there is a “no deal” Brexit the EU GDPR will no longer be law in the UK. However, as the UK government intends to write the GDPR into UK law, from all practical perspectives, GDPR will continue to apply.
2. Buying product from the EU
If you purchase product (either to use in the salon or sell as retail) from an EU country (which you may well do over the internet), you could see that stocks are harder to get hold of, or indeed the price may increase.
Tariffs, or customs duties as they are known in the UK, are a tax levied on imports. There are no tariffs on trade wholly within the EU customs union, but if the UK leaves the EU without a deal they will apply to UK-EU trade. Currently the UK’s trade with the rest of the world is subject to EU tariff rates. After the UK leaves the EU, tariffs will depend on trade agreements the UK has negotiated, which may well differ from country to country.
3. VAT
If the UK leaves the EU without reaching any agreement, the UK Government has indicated that there will be a number of changes to the VAT rules.
It has confirmed though that in the short term, it will continue to apply the existing VAT law as close as possible to that already in place. We know that it has been waiting to leave the EU before it undertakes a full overhaul of the VAT legislation, but at least in the short term, VAT life continues as-is within the UK; with any changes only relating to transactions between the UK and EU member states.
4. Are you (or any of your staff) EU,EEA, or Swiss-nationals?
If so, you (or they) will need to register for the settlement scheme.
Ensure any relevant employees are aware of the settlement scheme and the need to register. They will need to be living in the UK before it leaves the EU to apply and can see more details here:
https://www.gov.uk/settled-status-eu-citizens-families
If there is no deal, the deadline for applying will be 31 December 2020.
5. Cash
The consequences of a no deal Brexit are unclear. Nevertheless, it is always prudent for salon and barbershop owners to plan ahead and think about how they would deal with economic uncertainty, which inevitably occurs from time to time anyway. Economic uncertainty might affect your sales income (if Clients decide to reduce their personal spending), and your stock levels may reduce (if importing them becomes harder or more expensive).
Owners may need more cash on hand so they can make sure they continue to make payments on time (and have enough to live on of course). So would be worth having a cash provision at the ready, or at least know you have credit facility with your bank just in case.
Here’s hoping…
This doom and gloom scenario may or may not eventually transpire, but it’s worth considering it and ensuring you’re ready if it does.
The Salon Magazine contacted us to ask a simple question: “From what Salonfrog has seen, what do our most successful salon owners do, to make their salons successful?”
We started telling them, and they soon asked us to write an article for their magazine; and what started as a 400 word request soon became an 800 word answer!
We’ve include the article below the pictures (plus links to the magazine at the bottom).
What do successful salon owners do all day? Salonfrog explained that in their accountancy practice they see that some salon owners are more successful than others, here they reveal the steps to all-round salon success.
The successful business owners have usually made a conscious choice to be successful. Here’s what they do that most don’t.
Define what success means
Successful owners pick their definition of success. They ask themselves why they have a salon.
What does success mean to you? Do you want a steady income, or do you want to take a risk and open other salons? What services are you really selling? Why sell these and not others? Your answer might reflect the age of the business. In the growth phase, you want to survive, flourish and expand. If you’re in a maintenance period, things ticking along, you may be happy with the status quo. If you want to sell or retire, you may want to restructure the business in readiness.
Smart owners constantly revisit their definition of success. They bring their idea of success to their accountant, who will tailor advice, allowing their plan to be created.
Measure yourself
The best owners have key performance figures and compare these to their plan. They know they can control only what they measure. They also know they can’t measure everything, so they pick key measurements carefully.
Here’s some you might choose:
• Monthly sales target
• Staff utilisation – overheads walk on two legs!
• Retail sales rate – does your stock sell before you have to pay for it?
• Average customer spend – upselling transforms profits
• Repeat Client rate – are you winning long-term fans?
• Client growth rate – is your marketing and word-of-mouth working?
Again, pick a measure that reflects your plan.
No-one’s ever died of delegation
Why do so many salon owners never really grow their business? The answer is delegation. In Michael Gerber’s classic book, The E-Myth Revisited, we see how every small business owner has three conflicting sides to their personality: an entrepreneur, a technician and a manager. The entrepreneur wants to open a chain of cool salons; the technician just wants to cut hair; and the manager just wants everyone to stick to the rota, dammit. All three get in each other’s way; all three are disillusioned and want to quit. They’re all found in the same person – you.
Gerber’s bold solution is for salon owners to remove themselves from the business and really commit to delegation and outsourcing. Our most successful owners use Gerber’s ideas often (whether they know it or not). There’s a ton of stuff that accountants can take off an owner’s hands, so delegate it to them! As we say, “You can do anything you want, but you can’t do everything”. Hi-growth salon owners will delegate even those tasks they enjoy. They work ‘on’ the business as much as they work ‘in’ it.
Watch your cash
Many businesses go bankrupt while making a good profit. That’s a strange idea for novice owners to get their head around, but they soon do, once they hire staff and premises. That’s when they discover their money comes in gently and goes out in sudden, awful spikes.
To run out of cash is to run out of time. If you’ve got cash but no customers you can always try again tomorrow – but if you’ve no cash, there is no tomorrow. Your staff, your landlord and HMRC want paying today, and if you can’t, you’re done.
That’s why the best salon owners watch their cash like a hawk. They ask their accountant to do a cash flow projection, which is a sort of calendar with a theoretical doomsday marked on it. Few want to read it, but there’s no arguing with it. Profit is mere opinion, but cash in the bank is always a fact.
Have a not-to-do list
Everyone has a to-do list. You’ve plenty on yours, so you might not feel like making another – but all the best salon owners have a ‘not-to-do’ list. They use it to highlight red flags that can come between them and success. And they share their not-to-do list with their staff too.
A good not-to-do list might include:
• trying to please everyone and worrying about what they think
• ducking difficult decisions, maybe about staff
• doing what’s trendy and interesting, rather than profitable
• ignoring your health and never taking time off
• thinking the screen is your job (email is simply a list of someone else’s priorities!)
• take meetings without a clear purpose, preferably yours!
If these five best practices sound like too much to do, we should say that successful salon owners are often the happiest and fulfilled among all the clients we know. It’s just that some owners know how to grow a salon. It is a knack. It starts with knowing yourself and knowing that you can’t do everything.
Andrew Barraclough is from Salonfrog, a salon specialist accountancy firm which provides a full array of services wherever you are in the UK. Head to salonfrog.com for more details.
Links:
To magazine: http://thesalonmagazine.co.uk/the-salon-e-magazine-october-2019-issue/
To article: https://issuu.com/cimonline/docs/salon_october_2019_-_lr_08aeb28e946d06/108