How to Stay Safe from HMRC
15 January 14 | By: Jas Jhooty
There are two types of clothing that HMRC usually allows employers to provide tax-free to their staff. These are for: -
Safety & protective clothing
If you provide high visibility jackets or other protective clothing (e.g. safety footwear) to employees working in potentially hazardous conditions then HMRC will usually accept that there is no tax liability arising.
The only other occasion when clothing can be provided tax-free is in the case of clothing that can be regarded as being a uniform.
What is a “traditional uniform”
HMRC define a uniform as: –
“a set of clothing of a specialised nature that is recognisable as a uniform and is intended to identify its wearer as having a particular occupation.“
Examples include traditional nurse or police uniforms. The essential test is whether the employee would readily be recognised as wearing a uniform by a person in the street.
Formal evening dress which, because of the customary practice of a particular occupation, is habitually worn on a day to day basis while performing their duties (for example, dinner jackets worn by waiters) may also be accepted.
It is not enough for the clothing to be uniform in the sense that all employees in the same employment wear clothing of a similar design or colour. For example, a Bank may wish to reinforce its corporate image by requiring all counter staff to wear a shirt or blouse in the corporate colours of blue and green. HMRC will not accept that this type of clothing is a uniform and will seek to tax the provisioning of such clothing.
How can corporate clothing be treated as uniforms?
Fixing a permanent and conspicuous badge to what would otherwise be ordinary clothing is usually enough to make it a uniform. A detachable badge is not sufficient to make the clothing to which it is attached part of a uniform.
The use of conspicuous corporate logos sewn into articles of clothing that are visible to the public allows them to be categorised as uniforms and can thus be provided to employees tax-free.
However if you provide other clothing that may well have a logo sewn into them but which are not conspicuously visible to the public (e.g. shoes, socks and underwear) then HMRC will seek to tax the provisioning of such items.
How much tax is due on other clothing?
If you provide clothing that HMRC will not allow as being a uniform then the tax that the employee will have to pay will be based on the “annual value” of the use of the clothing. This is usually 20% of its market value when first applied as a benefit.
Laundry expenses that employee’s can claim
Employees are allowed to claim a tax deduction for the laundry costs of cleaning their uniforms. They can only claim this when there is no employer-provided laundry service. The amount depends on the profession of the uniform-wearer. A full list of professions and maximum allowable Flat Rate Expenses for uniform cleaning (and upkeep of tools if applicable) can be found here.
For all other professions HMRC allow a Flat Rate Expense of £60 per annum for the laundry of uniforms.
How emTax can help
Our experts in employment taxation can argue on your behalf why a set of corporate clothing should be classified as a uniform. Even in instances where HMRC have dug their heels in and insisted that a set of corporate clothing is not a uniform, we almost always manage to get HMRC’s agreement that the tax due will be negligible and that the provisioning of such clothing should be classified as a trivial benefit.
If you are on the receiving end of a HMRC enquiry into the provisioning of corporate clothing to your staff, please do not hesitate to contact us.