Uniformly taxed: is your practice workwear tax deductible?

Essentially, tax deductions can be claimed for uniforms and specialist clothing if they are “wholly and exclusively for the purposes of” the trade or the employment – in other words, if their only purpose is to allow someone to do his or her job.

The good news is if a piece of clothing qualifies for tax deductions, they can be claimed not only on the cost of buying it, but also on the cost of maintaining, repairing and replacing it in future years.

The bad news: ordinary clothes worn at work don’t qualify for tax deductions. Figuring out whether a piece of clothing qualifies as uniform or specialist clothing, rather than plain ordinary clothes, involves wading into a mire of case law.

What is ‘uniform’?

HMRC’s Employment Income Manual, written to guide HMRC inspectors as they scrutinise tax returns, defines 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”. So far, so good.

However, it is not enough for clothing to look alike for it to qualify as uniforms.

Clothes of the same colour and design won’t be accepted as uniforms, unless they “readily identify the employee to an observer as working for this [particular] employer”. So, adding detachable name badges to sets of clothes won’t help qualify those clothes as uniforms, either.

Putting a “permanent and conspicuous” badge or logo on to clothing might just about make it a uniform. However, whether it will qualify depends on specific circumstances, and even if the person is recognised as wearing a uniform, it doesn’t mean everything he or she is dressed in qualifies as one.

HMRC gives the example of an airline that requires its cabin crew to wear a blue jacket with a blue skirt or trousers with the airline name sewn into the material. The crew also has to wear a white shirt or blouse, blue socks or dark tights and black shoes. In this scenario, the jacket, skirt and trousers are tax deductible, but everything else is not.

Specialist clothing

The case law around specialist clothing throws up some rather surreal anecdotes. The core message is this: to qualify as specialist clothing, that piece of clothing must have one single purpose – to allow the wearer to do his or her job.

Any piece of clothing that has another purpose, such as providing “warmth and decency”, would not qualify as specialist clothing.

HMRC illustrates this with an example: employees working in a chemical factory wear protective overalls and boots. Underneath their overalls, they also wear shirts, trousers and underwear. They leave all their clothes at work to avoid contamination. Even if the employees never wear these shirts, trousers and underwear outside of work, the taxman would still not consider them to be specialist clothing.

Only the protective overalls and boots can be said to be “wholly and exclusively” for the purpose of the job – and, therefore, only they would qualify for tax deductions as specialist clothing.

In a veterinary context, a scrub tunic and trousers are likely to count, while a mock fastening tunic or colour coded hoodie may not.

The takeaway is that when designing uniforms for your staff, make sure the taxman can recognise them as uniforms. This means logos or practice names should be permanent and clearly visible. You have a better chance of getting tax deductions if the clothing is purely for the purpose of your business.

The mechanism for reporting and claiming the tax deductions differs depending on whether you are an employer, an employee or a self-employed individual.

Employer obligations

If you provide employees with clothing for work at your own cost – again think about whether they qualify for tax deductions as either uniform or specialist clothing. If so, it is well worth applying for a dispensation from HMRC to exempt the company from having to report the clothing-related costs and paying National Insurance on them. Without a dispensation, you will need to ensure the cost of providing and maintaining the clothing is reflected correctly on your employees’ P11D as a taxable benefit.

If you provide clothing that does not qualify for tax deductions, the costs related to them must be included on the employees’ P11D as a taxable benefit; you will also have to pay Class 1A National Insurance on them.

If your employees buy their own clothing, and the clothing qualifies for tax deductions, the easiest way to include the deductions in payroll is by applying a
flat-rate allowance (see later).

Self-employed

If your work clothes clearly don’t form part of your “everyday wardrobe”, think: are they wholly and exclusively for the purposes of your business?
If so, make sure you deduct the cost of buying and maintaining your work clothes from your taxable trading profit when filing your personal tax return. Remember, though, the tax office will still apply the test strictly.

The most famous case (at least in tax advisor circles) was a barrister who tried to claim for the sober skirts and blouses worn to court, as
she always wore brightly coloured clothes outside work.

The judge agreed with the tax inspector’s argument that even though she kept the clothes in the robing room at court and never wore them outside, she wore the outfits to “preserve decency” and keep warm – not just for work. Even if you always keep work clothes in the practice or the porch at home, the tax office is likely to run the same arguments today.

Tax deductions could be available if you buy or clean your uniform or specialist work clothing. The tax rules around this may be complex, but it pays to understand the basics so that you don’t miss out on potential tax deductions.

Employees can claim, too

If you have had to buy clothes for work, think about whether they are likely to qualify for tax deductions as either uniform or specialist clothing.
If this applies, check with your payroll section (or outside provider) to ensure your tax code has been adjusted correctly to include the tax deductions for the cost of the clothing.

Remember, if you also clean your own uniform or specialist clothing, you are also entitled to tax deductions on the cleaning costs. These deductions should be included in your payroll – either at the actual cost, or at the flat-rate allowance amount.

Flat-rate allowance

Employees who have to buy and maintain their own work clothes may be eligible to claim a flat-rate allowance for the upkeep of tools and special clothing that are necessary for them to fulfil their duties.

As an example, a flat-rate allowance of £100 would reduce the annual tax bill of a basic-rate taxpayer by £20. If you’re lucky enough to be a higher-rate taxpayer, the marginal reduction goes up to £40.

As vets aren’t specifically mentioned as eligible for the flat-rate allowance, it’s time to get to grips with the tax legislation – and this is where you’ll need good professional advice.

Interestingly, “health care staff in the [NHS], private hospitals and nursing homes” are mentioned, and their allowances, depending on role, vary from £80 to £185 per year. With a careful nudge, HMRC may well agree to apply the same to veterinary staff.

Table 1 summarises the effect work clothing can have on your tax bills in different scenarios. Specific circumstances can affect the tax treatment, so if in doubt, seek professional advice from a certified tax advisor.

Table 1. Work clothing and impact on tax bills
	Type of clothing	Tax effect
Employee	Employee-bought uniform/specialist clothing	Reduces personal income tax (deducted through PAYE) by the amount of purchase and upkeep costs
	Employee-bought ordinary clothes	Nothing
	Company-given uniform/specialist clothing	Nothing
	Company-given ordinary clothes	Increases personal income tax as a taxable benefit (added to PAYE) by the amount of purchase cost.
Employer	Employee-bought uniform/specialist clothing	Nothing
	Employee-bought ordinary clothes	Nothing
	Company-given uniform/specialist clothing	Reduces corporation tax by being deducted as trading expense
	Company-given ordinary clothes	Reduces corporation tax by being deducted as trading expense. Increases Class 1A NIC as a taxable benefit.
Self-employed	Uniform/specialist clothing	Deducted from personal income tax as a trading expense
	Ordinary clothes	Nothing