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Executive Report : Dress for the occasion
Providing staff with a uniform or other corporate workwear can have tax implications. Adam Bernstein outlines what to bear in mind.
There are a number of reasons why employers may want to give staff a uniform. It could be to create greater brand awareness, to offer protection to employees, or simply as a perk. However, this carries costs which, if HMRC’s rules are followed, can be offset against the business’s tax bill.
According to Helen Thornley, a technical officer at the Association of Taxation Technicians, a professional accounting body, HMRC’s view is that “for a garment to qualify as a uniform either the individual wearing it should be recognisable as belonging to a particular occupation (say, the police or a nurse) or the garments should carry a conspicuous badge or logo.” Importantly, she adds, the badge or logo should be permanently attached to the garment. If it is removable, she reckons HMRC could argue it is not really a uniform.
Interestingly, clothing is considered individually by HMRC. If an employer supplies a branded top and ordinary trousers as part of what they want staff to wear, while it might be what the employer considers the overall ‘uniform’, HMRC’s perspective is that only the branded top will qualify for tax purposes; the provision of the trousers would create a benefit in kind on which tax is payable by the employee.
Other items commonly supplied to employees could include protective clothing such as gloves, helmets, goggles, protective boots and overalls. Helen Thornley says, “An employer can claim full tax relief for the cost where genuine protective clothing is needed and there will be no taxable benefit to the employee.” She warns that if the employer provides clothing to be worn under the protective garments, it will not usually be allowed as a tax-free benefit, “but if the item has been accepted as a uniform or protective clothing, then it follows that the employer can claim tax relief for the costs of maintaining and/or cleaning these items without a benefit in kind charge for the employee.”
What happens if the employer provides - either gives or loans - exempt items of uniform or protective clothing, and/or cleans or maintains these items? These, says Helen Thornley, will be covered by an exemption. “However,” she explains, “where an employer provides non-exempt items, then there may be tax consequences. If the employer gives the employee clothing that they can keep, then the employer must report this on a P11D as a benefit. The amount to report will be the higher of the initial cost of the clothing to the employer or the value of the clothing when it is given. “The employee will pay tax on the benefit, and the employer will pay Class 1A National Insurance. But if the employer loans the employee clothing, then the benefit is assessed on the higher of 20% of the market value of the clothing, or the annual rental paid for the clothing. Again, this would go on a P11D and Class 1A National Insurance should be paid by the employer,” she says.
She notes that, if an employee is required to supply their own uniform, or has to buy branded items of clothing from the employer to wear, they will be entitled to claim tax relief for the cost of the uniform. “Again, this relief applies strictly to qualifying uniform items only. For example, if a member of staff is required to wear black trousers and a buy a branded top, then relief only applies to the cost of the branded top. There is no tax relief where clothing can be worn both for work and casually.”
It's worth pointing out that if the employee incurs costs cleaning or maintaining their uniform or protective clothing, they can claim tax relief for the reasonable cost of doing so. There are various flat rate expenses that can be claimed details of which can be found on HMRC’s website - https://www.gov.uk/guidance/job-expenses-for-uniforms-work-clothing-and-tools. The amounts vary by job or profession and it is important to look for the most appropriate. And lastly, employers who require their employees to purchase specific items of clothing need to take care that this does not result in the employee being paid less than the National Minimum/Living Wage. •