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The rules on uniforms

Where do tax exemptions apply when it comes to employee uniforms?

08 February 2019, at 1:24pm

There are a number of reasons why employers want to give staff a uniform. It may be to create greater brand awareness, to offer physical protection to employees or simply to offer them a perk in that they don’t have to provide their own clothing. No matter the reason, the provision of a uniform carries a cost which, if HMRC’s rules are followed, can be offset against a business’s tax bill. But as might be expected, treading a path through HMRC’s complex tax rules is not easy.

Defining a uniform

According to HMRC, for a garment to qualify as a uniform, either the individual wearing it should be recognisable as belonging to a particular occupation (such as firefighters, nurses or the police) or the garments should carry a conspicuous badge or logo. Importantly, the badge or logo should be permanently attached to the garment. If it is removable, then there is a real risk that HMRC will argue that the garment is not really a uniform. For many businesses, the latter is the more relevant category when they supply branded items of clothing for their employees to wear out and about to promote the business. In a practice context, medical uniforms stand a good chance of qualifying.

It’s also worth pointing out that there are some cases where “ordinary” clothing can qualify under tax rules as a uniform – for example, where it is customary in a profession to wear specific clothing. A waiter wearing a dinner jacket is a good example, but these situations are less usual. It is wise to seek a ruling from HMRC in these cases to avoid a nasty surprise later on.

Items of clothing are considered individually by HMRC. If an employer supplies a branded top and pair of ordinary trousers as part of what they want the staff to wear, while it might be what the employer considers the overall uniform, from HMRC’s perspective, only the branded top will qualify as a uniform for tax purposes. The provision of the trousers would create a benefit in kind on which tax is payable by the employee.

Protective clothing

Other items that employers commonly supply to employees include protective clothing such as gloves, facemasks, goggles, protective boots, overalls, etc. Here, an employer can claim full tax relief for the cost where genuine protective clothing is needed and there is no taxable benefit to the employee.

Note though that if the employer provides for clothing to be worn under the protective clothing, this is not usually allowed as a tax-free benefit. Equally, the employee can’t claim a deduction for the cost of the clothing they use.

Cleaning

If the item has been accepted as a uniform or form of protective clothing, then it follows that the employer can claim tax relief for the costs of maintaining and/or cleaning these items and this will not create a benefit in kind for the employee.

The tax position

Where the employer provides (either gives or loans) exempt items of uniform or protective clothing, and/or cleans or maintains these items, they will be covered by an exemption and there is nothing to report. However, where an employer provides non-exempt items, there may be tax consequences. These depend on whether the employer has loaned the employee the items or given them.

If the employer gives the employee clothing that they can keep, the employer must report this on a P11D as a benefit. The amount to report will be 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.

If the employer loans the employee clothing then the benefit is assessed on 20 percent 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.

What if the employee incurs costs?

If an employee is required to supply their own uniform, or they have 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 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.

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 the HMRC website here.

The amounts vary by job or profession. While the veterinary profession isn’t listed, there may be coverage found under “Healthcare”, where nurses can claim up to £125 off their tax bill, while uniformed ancillary staff can claim £80.

National Minimum/Living Wage issues

Lastly, employers who require their employees to purchase specific items of clothing do need to take care that this doesn’t result in the employee being paid less than the National Minimum/Living Wage. The definition of a uniform for the National Minimum/Living Wage is not the same as for tax purposes and if employers are taking deductions from their employees or require them to purchase specific items of clothing to do the job, they need to check if such costs could reduce staff pay below the legal minimum.

Providing uniforms to employees can be of great benefit to both the employer and the employee. While an employer can do whatever they want in terms of providing uniforms, they must follow the rules carefully if they want a tax write-off against those items provided.

WHY FIRMS PROVIDE STAFF UNIFORMS

  1. A uniform can help all staff to look their best. Whether they are in administration, management or on the front line of a practice, a unified look – a uniform – gives everyone the opportunity to look good and feel their best.
  2. Employees spend less time deciding what to wear to work. Just as some schools are now banning high-end branded clothing, employees also have to worry about what to wear to work, asking themselves what is appropriate. By implementing a uniform policy, a practice removes this stress from staff.
  3. Employees look more professional. It’s a fact that we’re judged on appearances, and quickly too. By creating a uniform look for the team, a practice can ensure that its front-line staff always look professional as they represent the brand.
  4. A uniform will immediately establish the image of a professional business that attracts and helps retain customers. This is especially important for client-facing staff. A well put-together uniform speaks to the customer in a way that gives them confidence in the practice and its offerings.
  5. Uniforms work as a form of advertising and enhance the brand. Businesses spend a fortune on advertising and marketing. From logos to colours and documentation, the brand should be everywhere. It’s a huge mistake to forget about adding the brand to the clothing that staff wear.
  6. Uniforms promote team spirit and a sense of belonging, in turn improving productivity. Sports teams wear a standard strip for a reason – it helps to build a team with a sense of belonging and cohesiveness. This in turn can enhance productivity.
  7. It saves money. Good quality corporate clothing can be expensive. By investing in a quality uniform upfront, money can be saved in the long run. Whether the practice chooses to supply all or part of the uniform, staff can salary sacrifice their contribution where appropriate. This means staff are not required to spend ongoing money on work clothes and there will be no need to worry about keeping up with the latest fashion trends.

Helen Thornley, MA (Cantab), is a technical officer at the Association of Taxation Technicians. She joined the association in July 2017 after 10 years in practice specialising in private client work. Based in Cumbria, she writes about the interesting aspects of taxes – both ancient and modern.

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