A uniform can be a great asset to your business, from emphasising your brand to allowing you to stand out to your customers, and from your competition. But, when specific criteria are not applied, it can also cost your business a hefty tax bill.
Leading UK supplier Simon Jersey explains uniform tax, the key rules you should know, and how branding can help you avoid paying unnecessary costs.
When is a uniform a uniform?
In business, a uniform to many people is the clothing that an employee will wear for their job at a particular company. However, in the eyes of the tax man, this is not the case. According to HM Revenue and Customs (HMRC), this clothing is only a uniform when it is permanently branded with the logo of that particular company. Otherwise it becomes what’s known as a fringe benefit.
Because it’s not branded it can, in theory, be worn outside of the workplace, meaning it’s seen as a benefit. And as it’s viewed this way, either the employee or their employer is liable to pay tax for it.
Distinguishing between uniforms and ordinary clothing
Many people might argue that employees would never wear their uniform, or part of it, outside of work hours. However, to HMRC this doesn’t matter. The tax rules that are in place make a clear distinction between clothes that function as an organisation’s uniform, and clothes that can be worn anywhere – regardless of whether they would be worn or not.
It also doesn’t make a difference to HMRC if a uniform consists of particular colours or patterns to match a company’s brand. In such cases, the tax rule still applies.
When uniforms are exempt from the tax rule
There are two instances where uniform tax doesn’t apply. These are:
Uniforms for safety – This is concerned with clothing that’s provided for staff to do their job safely. For instance, personal protective equipment (PPE) that’s legally required for an employee’s role, such as hard hats, safety shoes and high visibility jackets. If PPE is required, no tax will be applied – even if the item is not branded.
Uniforms to mark specific roles – This is concerned with clothing that marks a specific type of role and is provided for an employee to carry out that specific job. For instance, a medical tunic that a nurse might wear when attending to patients on a hospital ward.
Defining permanent branding
So if uniforms must be permanently branded to be classed as a uniform and be tax free, what does HMRC define as permanent branding?
It is when the branding is permanently visible on uniform clothing, such as if it’s sewn into the garment. Branding that’s detachable, such as a name badge, doesn’t count. This means that a shirt, which has a business name tag pinned over the pocket, would still be taxed under HMRC’s rules as the item could be worn without the name tag outside the workplace.
Every item of a uniform must also be branded to avoid tax, even if the items are worn together. For instance, if a branded apron was worn over an unbranded shirt, tax would still need to be paid on the shirt.
Types of branding to avoid uniform tax
There are different ways to create effective permanent branding for your company uniform, which distinguishes the garments you provide as uniforms, ensuring you avoid a heavy tax bill. This includes branding via embroidery, printing or tabbing.
This is a hardwearing type of permanent branding, which provides longevity and quality, as the branding logo is embroidered into the garment. It’s also an impactful way to reinforce and enhance your brand in your clients’ and customers’ eyes. Examples could include a small, subtle logo on the sleeve of a corporate shirt or blouse, or a proud design on the chest or back of a beautician’s tunic or across a waiter’s apron.
Another impactful way to permanently brand your company uniform is screen printing. It involves using printing press equipment to print the branding on the garment. Though it can be less lasting than embroidery, when done well it can be striking, making your logo stand out and help your brand have an impact on your customers. Examples include a large colourful logo on the back of a construction company’s hoodie, or a brand name across the front of a retailer’s polo shirt.
Commonly known as “tax tabs”, this offers a discreet way to permanently brand a uniform. It involves sewing a small piece of fabric, featuring, for instance, a business’s logo, into an item of uniform clothing. This is usually fitted to an unobtrusive but visible part of the garment. While it’s not appropriate for big and bold permanent branding, tabbing offers a subtler approach to effectively brand clothing. Examples include the side seam or breast pocket of a medical receptionist’s shirt or blouse, the waistband of a pair of trousers or business skirt, as well as the pocket seam of a hospitality suit jacket.
When you run a small business, it’s important to keep on top of your finances as best you can and ensure your outgoings are kept to a minimum. Avoiding paying uniform tax by incorporating permanent branding, via embroidery, printing or tabbing, can help. By doing this you can create an official uniform with memorable branding, while making sure your company sits on the right side of the tax law, benefiting your business and saving you money in the long run.
Source: Business Achievers