Many businesses want to provide their staff with uniforms in keeping with the company’s image. However, they count as a taxable perk unless conditions set by HMRC are met. Nicola Roby Director, explains how can you avoid a tax charge from arising?
The basic tax rule is that assets given or lent to employees wholly or partly for private use count as a benefit in kind (BIK). This includes clothing provided to employees. The good news is that in some circumstances the law or HMRC practice exempts them from liability.
Since 6 April 2016 gifts to employees which are “trivial”, i.e. cost you no more than £50, are tax and NI free, and can be made as many times per year as you wish (gifts to directors are capped at six per year each up to the value of £50).
If a work outfit consists of components, say shirt, plus trousers/skirt which cost you more than £50, you could provide each as a separate gift, tax and NI free, as long as each item costs £50 or less.
If an item of clothing costs more than £50 then whey would be classed as a BIK. Instead of giving it to your workers you could lend it. The BIK for this is 20% of the item’s value when first provided to the employee, plus any maintenance costs, e.g. dry cleaning, per year. As long as these amounts total less than £50 the trivial exemption can apply. This method might come in useful if none of the other exceptions to tax and NI can be used.
There are exceptions though – There’s no tax or NI liability if the clothing counts as protective or is a uniform. Clothing is protective if it’s “worn as a matter of physical necessity because of the nature of the job” e.g. overalls, protective gloves, etc. It should be fairly obvious if this condition is met.
Uniforms are also excepted from tax and NI, but deciding what counts as a uniform can be tricky. HMRC says a uniform is clothing that can “readily be recognised” as such “by the person in the street”. Requiring employees to follow a corporate dress code, say a black suit and white shirt, isn’t enough, it must obviously be a uniform.
The inclusion of your firm’s logo, if sufficiently obvious and recognisable, can turn an otherwise ordinary item of clothing into a uniform.