From biblical times to the present day, clothing has been worn for more than one purpose at a time – for protection, for comfort, for modesty, as a uniform or because it is traditional. This inherent “duality of purpose” element of wearing clothing for more than one reason at a time is a cause celebre as far as HM Revenue & Customs (HMRC) is concerned. As a result the Inspector of Taxes will often seek to disallow or to tax the costs of clothing when they appear in a business’s accounts or as a tax claim.
For the purposes of this month’s article, we can consider the two main ways that clothing comes into the realm of taxation:– as an expense incurred by a trader or employee; or by an employer providing the clothing to its staff. An employee will only ever get relief if it is a necessity that they purchase or provide the item of clothing (often being a requirement laid down in their contract of employment). Beyond that first requirement for employees, HMRC’s general position is that clothing that is worn as part of every-day life is generally not allowed as a deduction (or if provided by an employer, it is taxed as a perk or benefit). To put that into context, an office worker will not get relief for the cost of wearing a suit to work as this type of clothing can be generally worn outside of work, and has the duality of providing warmth and comfort. This would be the position even though an employee would be required in his contract of employment to wear a suit whilst in the office. However, if you are required to wear protective clothing such as steel-toecap boots, overalls, hard hat and gloves, for example, these may be claimable as a deduction. For the trader, the suit is still disallowable, but it is easier to claim the cost of protective clothing than for the employee (although a self-employed driving instructor might have a question raised about a claim for a hard hat unless you had particularly unruly students). There is a grey area when it comes to items of everyday clothing that are also of a protective nature such as jeans or thermal underwear. Overall the general rule of thumb is that if they can be worn as everyday wear, the duality of purpose rule would be applied but if you can justify a specific claim for (say) the thermal underwear and you are, for example, a mountain guide where the wearing of such clothing becomes more of a Health & Safety issue, HMRC may allow the claim.
Incidentally, specifically for employees, various industries have agreed flat-rate expenses with HMRC in the past whereby if you are required to fund items of protective clothing, small tooling or incur laundry expenses, HMRC will allow a deduction in your PAYE code without the need for a separate claim (or sight of receipts). Amounts above the agreed flat rate expenses can be claimed but will need to be agreed on a case by case basis with HMRC. The current list can be seen here.
Where HMRC do concede non-protective clothing to be allowable is in the matter of customary attire, costumes and uniforms. In the famous case of Mallalieu versus Drummond in 1983, it was decided that a barrister could claim the cost of her wig and gown (being customary court attire) but the smart business-style clothes worn underneath were not allowable. HMRC also concede that a waiter’s Dinner Jacket is a form of uniform (akin to a nurse’s uniform for tax purposes) and if the employee or self-employed professional incurs the cost, this is an allowable deduction. For costumes, HMRC do appear to be relaxed and stage clothing is often allowed where it is purchased for a performance, even if there may be incidental personal use (of a negligible level) afterwards. In their guidance, HMRC give the example of an actress purchasing an evening gown purely to attend a premiere being an allowable deduction (even though there may have been later incidental personal use for dinner dates, etc). But had the gown been purchased from the outset for use at the premiere and for dinner dates, the duality rule then kicks in and no deduction is due.
Of more relevance to everyday businesses will be the matter of advertising. Where clothing – even regular clothing such as polo shirts or fleeces – carries your company name or logo in a prominent position, this is an allowable expense for tax purposes. It would certainly help if the clothing were also of a consistent corporate colour-scheme as well. Items such as reflective jackets that carry a business name can sometimes even qualify under two headings (but you will still only get the relief once).
Finally, back to the position for an employer – where you provide the clothing to your staff, the cost of the clothing will always be allowable in your accounts. This is because it will either be a benefit or perk (and as such forms part of the remuneration package of the employee), classified as advertising (in the case of corporate branded clothing) or provided as part of your general equipment (in the case of protective clothing). Where the employee is required to wear your branded clothing as part of their employment, if you provide the clothing this will not be a benefit to them as it would be classed as a uniform in their hands.
For further information on any of the above points or to discuss your tax affairs generally, please do not hesitate to contact Robin Beadle.
