They say that the VAT incurred by a taxable person on uniforms or protective clothing worn by themselves or their employees in the performance of their duties can be treated as input tax because it is a business expense.
The wig, gown and bands that a barrister is required to wear in court are considered to be a uniform and the VAT incurred is input tax. It is also a court requirement that barristers wear dark clothing. For example, male barristers may wear striped trousers, a black jacket and a waistcoat with a white wing collar, and for a female barrister a dark (black, navy or grey) suit and a white blouse. If barristers claim that this clothing would not have been purchased if they did not have to attend court, HMRC accepts that the VAT may be deducted as input tax.
However, claiming the VAT back on other clothing might not be so simple. In the case of B J Brown (LON/90/1681) the Tribunal dismissed the taxpayer's argument that an art consultant required a high standard of dress to ‘create a professional image’ in order to attract business.
The provision of clothing is normally a personal responsibility. In the Tribunal case Ms J K Hill and Mr S J Mansell, t/a J L Hill and Co (LON/86/472Z) it was stated that ‘to dress well in order to conform with the standards of a particular lifestyle’ was not a business expense. So buying a nice suit on the business is out!
One classic case involved a musician who claimed the VAT back on a wig! HMRC paid him a visit and not surprisingly disallowed the VAT. The taxpayer claimed that the wig was necessary to maintain his image as a musician. Photographs, posters, record covers, press releases and artwork (upon which his business relied) would all need to be reprinted if his appearance altered. So he appealed to the VAT Tribunal and they decided that the wig had indeed been purchased for the purpose of his business and he could keep the VAT! (JM Collie Tribunal LON/90/1382).
The VAT on clothing used solely as stage costumes is also input tax. Ordinary clothing worn by an entertainer or TV personality will usually be worn privately as well, in which case the VAT cannot be reclaimed.
For non-musicians (such as you and your staff) you can use the series of business gifts rules to claim the VAT back on “perk” clothing (i.e. not uniforms or protective clothing).
Practical Tip :
Perks are an accepted business expense, therefore, if employers decide to provide their employees with clothing the VAT incurred is input tax. However, if the cost of the clothes exceeds £50 in any twelve-month period you have to account for output VAT on their value. So make sure the clothes are worth less than £50 excluding VAT.
Andrew Needham
