Many companies purchase clothing for their staff. However, can you claim the VAT back? What happens if your staff is given clothing?
Uniforms and protective clothing have a business purpose and that is evident. If the clothing is worn by staff members, and this includes company directors, then the VAT can be recovered. If a sole proprietor or partner wears the clothing, then VAT can be recovered too.
Helmets, steel toe capped boots and high visibility jackets are examples of protective clothing. Other examples include protective trousers. If you have such type of clothing, the chances are you can recover VAT. Take a look at VATIT for advice on different VAT rules.
On that note, if the uniforms you gave are no longer owned by your business, then you can still claim VAT. The same goes for protective clothing. Make sure you keep that in mind.
If a partner or sole proprietor purchases clothes to wear for work, then they might not be able to reclaim VAT. This typically happens in the event they wear the clothing for dual purposes. For example, they buy clothes to wear for work and they also wear those clothes for personal reasons, such as going to a wedding.
However, if your company adheres to a dress code, and you purchase clothing for your staff, then this is a business expense. You’ll be able to reclaim input tax. The different when recovering VAT back is that it’s for staff members and not those who own the business.
If you give clothing to your workers, then they will own it. This means you gave them a business gift. If the clothing was more than £50, then this would fall under business gift rules. What would end up happening is everything would be cancelled out and this would be treated as a notional sale.
If you buy your staff uniforms and protective items, then don’t give the items away to your staff. Your business should remain owners of those items. When the worker leaves, they should return your clothing.
When the above happens, then you won’t be subjected to business gift rules. Include this intro employee contracts. You can also document this.
Clothing with Logos
Many companies provide their workers with a fleece or a shirt that has a logo on it. This doesn’t count as being a uniform. However, if you tell your workers that the shirts remain under the company’s ownership, then you can recover the VAT.
Selling Clothes to Workers
There are companies that charge their staff for clothing. Some companies charge them for the supply, but regardless of how you put it, the workers are paying. Companies can claim back the VAT, but only on the purchase price.
Also, the output tax has to be taken into consideration. As for direct tax, companies that give their workers clothing for free and if that clothing is not for work purposes, then this may mean tax has to be paid. If you have any questions about going about recovering VAT, then you should contact an accountant and ask them for help.