Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.
What is included as a clothing expense?
As part of clothing expense rules, HMRC includes everything related to the provision of clothing for your employees – so this includes the purchase of clothing, the laundry costs and any repair costs. Whether you have to report these expenses to HMRC and pay any additional National Insurance or tax depends on whether it is protective clothing that is required for your employee to do their job or a uniform that they only wear at work.
Are there any exemptions?
No additional tax or National Insurance is payable on most uniforms or protective clothing but these expenses will still need to be reported to HMRC. It will also need to be reported to HMRC if it forms part of a salary sacrifice agreement.
How should it be reported to HMRC?
If the clothing isn’t classed as exempt, not only will you have to report it to HMRC but you might also have to pay tax and National Insurance on the value of the clothing provided.
- Uniforms and protective clothing: you need to report the costs of buying the clothing, lending it to them and any cleaning or repair costs on your P11D form. These would be classed as exemptions (formerly known as dispensations) so you wouldn’t need to include them in your end-of-year reporting to HMRC.
- Any other clothing: if you buy or lend any other form of clothing to your employees, you need to report this cost on your P11D and pay Class 1A National Insurance on its value. This includes clothing that your employees wear to work but that doesn’t form part of a uniform. If your employer buys the clothing and you reimburse them for it, you need to add the value of that benefit to their other earnings and the deduct PAYE tax and Class 1 National Insurance through payroll as you would for their other earnings. If the employee buys any clothing that HMRC class as non-durable (such as tights) and you reimburse them, again you need to add the value of that benefit to their other earnings and the deduct PAYE tax and Class 1 National Insurance through payroll as you would for their other earnings. Similarly, if the employee has an item of clothing cleaned or repaired and you reimburse them for the cost, you need to add the value of that benefit to their other earnings and the deduct PAYE tax and Class 1 National Insurance through payroll as you would for their other earnings.
How do you work out the value?
The value you assign to the clothing for HMRC purposes depends on whether you lend or give the clothing and who initially pays for it.
- Clothing that you give to an employee: use the higher of the initial cost of the clothing to you or its second-hand value when you give it to the employee.
- Clothing you lend to an employee: use the higher of the annual rental or hire charges you pay for it or 20% of the clothing’s market value when you first provided it.
- Clothing that your employee buys (or cleans or repairs) and you reimburse them for: use the amount that you give your employee, whether it applies to the purchase, cleaning or repair of clothing.
- Salary sacrifice arrangements: if the clothing cost is less than the amount of salary they are giving up, report the salary amount.
How can DSR Tax Claims help?
We aim to make life as simple as possible for our clients and that includes giving you the information you need to make your taxes (and your life) simpler and less stressful. Our team of experts at DSR Tax Claims are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.