Clothing costs tax deductibility

Our clients often ask if purchase, rental or even cleaning of clothes is an allowable expense for their business when those are used in a business context. Unfortunately, the answer is most often no.

To begin with, only protective clothes or uniforms are allowed (be it their direct cost or their cleaning cost). A TV presenter will therefore be unable to claim the cost of his wardrobe used to go on air, even it it has never left the studio. As a matter of fact BBC Breakfast host Sian Williams lost such a case with HMRC. The taxpayer, claimed deductions for a ‘professional hairdo’, professional clothing and laundry in her 2004/05 tax return and HMRC did not allow the claim. The taxpayer appealed but the judge found for HMRC, arguing that the taxpayer’s clothing was ordinary everyday wear and not restricted to work. It was irrelevant whether or not the clothing was worn when away from work; it was enough that it could be.

In cases where the clothes are protective or clearly branded, ie. cannot be used outside of work, their cost is an allowable expense and accordingly, their cleaning as well. However HMRC has put limits in place as to how much those expenses can be. They even put up a detailed page with a maximum cost one can deduct based of the type of occupation. For example, the armed forces can claim £100 per year whilst a firefighter can claim £80. Whilst for other employees £60 per year that can be claimed by employees in general where they can meet the statutory test outlined below.

In practice, the cost of clothing is seldom allowable as a deduction from earnings as it rarely meets the strict statutory test at s336 ITEPA 2003. The test requires that the employee is obliged to incur and pay it as a holder of employment and the amount is incurred wholly, exclusively and necessarily (‘WEN’) in the performance of the duties of the employment. It is common for employees to meet part of the above requirement but fail to meet the whole requirement.

This is illustrated in a decision released earlier this year the First Tier Tribunal: three individuals who worked in sewers had made a claim for the cleaning costs of their clothes. Their appeal against the original judgement was dismissed by the FTT. The Treasury has not fixed any amount for relief in relation to drainage and sewerage workers or ground maintenance workers – they are not on the guidance referred to above. In respect of toiletries, the FTT was not satisfied that such expenses were incurred ‘WEN’ in the performance of the duties of the employment. They were incurred partly for purposes of everyday personal hygiene. The FTT did indicate that a claim for £60 would have been acceptable but the claim for £2,200 was not.

As we can see, the test is particularly tight and in many cases the claim will be denied on the grounds that the clothing provides warmth and decency as well and therefore fails the wholly exclusively and necessarily test.