8 December 2010

• HMRC warns has warned inspectors to enforce the rules
• Trend for low key uniforms may give rise to tax charge

Employees who wear uniforms provided by their employers could face an unwelcome tax bill as part of a clampdown by HM Revenue & Customs (HMRC).

Many temporary employees are likely to be provided with uniforms by retailers, bars, hotels and restaurants in the run-up to Christmas.

Uniforms provided to staff by their employers may be deemed a taxable benefit if they do not meet HMRC’s exacting criteria. According to official guidelines, clothing provided by employers should have clearly visible and permanent badging, for example.

There is a growing trend, however, for employers to provide staff with more discreet uniforms without obvious and permanent badging. Employees face being taxed on such clothing as a benefit in kind.

HMRC is likely to have reminded its inspectors of the guidance on clothes as a taxable benefit in the run-up to Christmas following a recent admission by HMRC that ‘officials were not following HMRC’s own guidance on this issue’.

Roy Maugham, tax partner in our London office, comments: “Employers in the retail and hospitality sector take on significant numbers of additional staff at this time of year, so need to be aware of the possible tax implications of providing uniforms. Unwitting employees could end up with a tax charge simply because the uniform does not conform to HMRC’s rules.”

“There has been a growing trend in recent years for employers to provide staff with discreet uniforms. Many of these will not be considered uniforms for tax purposes, and employees could therefore find themselves with an unexpected tax bill.”

“It may seem pedantic, but if a badge is removable rather than permanent, the clothing will not be considered a uniform for tax purposes.”

He adds: “HMRC is likely to have tightened up enforcement of this area following revelations that its own inspectors have not been applying the letter of the law.”

Roy Maugham