Would the Tax Man Take the Shirt off Your Back?
Employee Clothing Tax Deductions
There are a lot of jobs out there for which it is necessary that an employee wears specialist clothing, from builders to waiters to carers. In some cases, these may be provided by the employer who may not need to pay any tax or national insurance on the items. In some cases however the responsibility to purchase and maintain work clothing falls on the employee. We’re taking a look at what clothing employees are able to claim tax relief on and why recent requests are blurring the rules.
The general tax rule set out in ITEPA 2003, s. 336(1) states that a deduction from earnings is allowed for an amount if,
- The employee is obliged to incur and pay it as holder of the employment, and
- The amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment.
Protective Clothing
Where paid for by the employee a deduction is allowed for ‘genuinely protective clothing’ worn ‘as a matter of physical necessity because of the nature of the job’. Any non-protective clothing worn underneath this protective clothing will not be included in the deduction.
Uniforms
Where an employee is obliged to wear and pay for part or all of a uniform, deductions should be allowed. Where an employee is required to wear uniforms or protective clothing and is responsible for the upkeep of these, a deduction is allowed for the incurred costs. Only the net cost to the employee will be deductible if part of the expense is paid by the employer. No cost is included for the wear and tear and cleaning of ‘ordinary’ clothing.
Cleaning
Higginbottom, Critchley & Lyons:
As part of Mr Higginbottom’s job, he was required to go in and out of sewers 12 or 13 times a day. Due to the nature of the work, laundry was necessary and not an optional extra. The question for tax purposes was, how was it done?
Mr Higginbottom would wear full regular clothing underneath protective clothing. All of what he wore for work needed washing daily. This was done at his home using special detergent bought with the household shopping. However, the receipts for this were never kept or recorded. As a result, HMRC was only able to stick to the specified standard rate of £60 allowance. Adequate evidence of expenditure actually incurred is needed if the deduction is greater.
The result of this case could have turned out differently. If receipts had been kept and there had been reliable estimates for the cost of running washers and driers.
Fixed Rate Deductions
Provision is made in ITEPA 2003, 366 and 367 for fixed rate deductions, which covers sums spent to maintain or renew tools and special clothing necessary for the employment. This includes items such as protective wear for builders and scissors for hairdressers. The availability of some limited tax relief for expenses incurred, without the need for detailed records or receipts is an advantage for employees.
The flat rate deductions apply to certain industries where an expense is necessarily incurred by the employee. Not where the employer reimburses the amount. The deduction is reduced where a partial reimbursement is made.
Some specified industry rates include £120 for stone masons, £100 for agricultural workers and £60 for lacemakers, dyers, knitters and scourers. Separate flat rates apply to nurses and other health care workers and airline pilots. Of course, not all industries are listed in HMRC’s Employment Income Manual. For those HMRC allow an annual £60 allowance for upkeep and replacement of specialist or protective clothing.
As a business owner, your employees may be required to wear specialist or protective clothing for the demands of their job role. If you are unsure whether you should provide this or whether your employees should provide their own workwear and what the implications of this would be, then please get in touch with us for further information.