If you are going to dress for success in your business, then surely it is a allowable business expense? Unfortunately not. This is an area that causes a lot of disappointment for our clients as HMRC are very strict about what clothing is allowed. You will probably be surprised by how little business clothing you can actually include.
Why so strict?
Just as everyone has to “eat to live”, everyone needs to wear something for “warmth and decency”. Therefore most clothes don’t full under the category of wholly and exclusively a business expense. HMRC uses the phrase “everyday wardrobe” with regards to clothing expenses. Any clothing that could conceivably form part of your everyday wardrobe, i.e. could be worn outside of the work environment, is not allowed. It does not matter whether you do or don’t actually wear the item outside work, what counts is whether you could.
Protective clothing required for your work such as high-vis vests, helmets, safety boots, overalls, trousers with padded knees etc. These type of items would normally be bought from a specialist supplier or builders merchant.
Uniforms, such as a beautician’s tunic or nurse’s uniform. Only the actual uniform garments are allowed. For example if all the beauticians in a salon had to wear an identical black logo’d tunic but could wear it with any pair of black trousers then the tunic would be allowable but the trousers would not.
Costume if you are an entertainer.
Everything else. Anything that could be part of your everyday wardrobe e.g. anything bought from a normal “high street” shop, internet retailer, sports shops or outdoor shop.
Because this is such a difficult area to pin down, HMRC have lots of pages of examples of what is and isn’t allowed in each case. My favourite is that formal evening dress is an allowable expense, but only if you work as a waiter in an expensive restaurant. If in doubt then chat to your accountant about it.
Clothing that has had a company logo put on. HMRC are a little cagey around this and say, “Fixing a permanent and conspicuous badge to what would otherwise be ordinary clothing may be enough to make it a uniform, but each case must be considered on its merits.”
If you do need some t-shirts, fleeces, jackets etc specifically for work, the safest option is to get them permanently and conspicuously logo’d. Ideally this will be allowable as a work uniform, but it could also be considered to be an advertising expense.
There are some additional complications for limited company directors, who are considered to be employees of the company. Clothing provided to employees is one of the items that should be reported in the annual P11D form as part of the company payroll process and it may be considered to be a personal taxable benefit.
If the company provides clothing
All clothing must be reported on the P11D whether allowable or not. The allowable clothing (uniform and protective clothing) is not taxed, but any other clothing is considered to be a taxable benefit to the value of the clothes purchased.
If you only provide allowable clothing you can apply for a dispensation from the P11D reporting via the P11Dx form.
If you provide your own clothing
If you provide your own specialist clothing or uniform, rather than paying for it through the business then you can avoid the P11D form. You must bear the cost personally but you can also claim an allowance in your personal tax return for the costs of upkeep, replacement and repair.
The standard flat rate allowance is £60 per year but there are different allowances agreed for certain industry sectors e.g. a stonemason can make a deduction of £120 per year for the upkeep of specialist clothing. See the full list.
If your costs are higher than the flat rate and you can prove it e.g. through receipts and records, then you can include a deduction for the actual costs instead.
You may wish to speak to your accountant about whether it works out better for you to put the uniform / protective clothing through the business or to pay for it personally and whether to claim flat rate or actual costs.
Ordinary clothing is not allowed as a business expense
Only uniform and protective clothing (plus costumes for entertainers) are allowable
If you are a sole trader then you can put uniform and protective clothing through the business
If you are a director of a limited company there are additional complications. You may be better off paying for the clothing personally and claiming a personal deduction