GETTING A TAX DEDUCTION FOR YOUR WORK CLOTHING COSTS
Looking back on my professional career I’ve always been surprised the number of times I’ve been asked whether a suit is tax deductible. I always think that the answer is obvious (no). However, because the question is asked so often I know that I must be mistaken in thinking that the answer is so obvious.
Therefore, to bring some clarity to the situation I thought it would be worth pointing out why a suit fails the test of being tax deductible, and whether there are any other circumstances where clothing could pass the test.
WHAT ARE THE TAX RULES?
Our old friend the “wholly and exclusively” rule is the determinant. The courts decided long ago that while you might only wear a suit because it is expected of you by your clients, it also serves a dual purpose of providing you with warmth and decency. As a result a suit fails the wholly and exclusively test and is not allowed as a business deduction.
The duality problem would seem to place a barrier against claiming for all clothing (as all clothing provides warmth and decency). So, are there any circumstances where clothing can be tax deductible? You’ll be pleased to know there are.
PROTECTIVE CLOTHING (EIM32465)
Overalls and protective boots are the most obvious examples I can think of that would be described as protective work clothing. Both would pass the test of being tax deductible. They are allowable because the warmth and decency objection fails. Warmth and decency are incidental to the protection necessary to carry on your trade. As a result they pass the wholly and exclusively test.
UNIFORMS & SPECIALIST CLOTHING (EIM32475)
Also, when the trade you’re in requires you to wear a uniform or costume the cost of it will also be fully tax deductible.
Example - you run a restaurant and employ waiters. You provide your waiters with a dinner suit. This is their uniform, therefore would be fully tax deductible, and there would be no benefit-in-kind on the employee.
Tax warning:- It is common for companies to promote a corporate brand. As such they ask employees to dress in the same corporate colours (i.e. red shirts, black trousers). If these were provided as the employees “uniform” then employees would still be getting the benfit of warmth and decency. Therefore, although the business would be entitled to a tax deduction, the employees would face a benefit-in-kind for the cost of the clothing (EIM32477).
Tax Tip 1:- To avoid the benefit-in-kind ensure that such uniforms have a conspicuous non-removable badge or logo embroidered into the work clothing to advertise the business (EIM32467). This would make the warmth and decency argument incidental again.
If the clothing passes the wholly and exclusively test above then you can also claim back a reasonable cost for the maintenance of the work clothing. This would include the cost of cleaning the work clothing. If you as the employer clean the clothes then claim back a reasonable cost through the business. If your employees wash their own clothes then they can claim a reasonable laundry cost through their Tax Return.
Tax Tip 2:- If you run a limited company and calculating the laundry costs seems too difficult then the Taxman helpfully publishes scale rates for the laundry costs of cleaning your work clothing which range from £60 to £140 depending on the industry you work in.
Tax Tip 3:- If you’re a sole trader or partnership consider approaching the Taxman to agree an annual deduction in your accounts for laundry costs based on the above scale rates.