If you provide clothes for your staff to wear at work, you need to be aware of the tax and VAT implications, which may vary according to the items provided.
Where clothes would be considered to be part of the staff uniform, overalls or protective clothing needed for the job, the cost is tax for the business and the VAT can be reclaimed. There is no taxable benefit in kind for the employees.
In other cases the tax treatment depends on whether the employees are permitted to keep the items.
Where ownership of the items passes to the employee, and the value is more is more than £50 per employee per year, treat the provision of the clothes as a sale at cost price. Account for VAT as if the clothing items had been sold at the cost to you.
The value of the clothes provided may be a taxable benefit for the employee, which needs to be accounted for either on the annual form P11D or as part of a payroll settlement agreement (PSA). Employees earning less than £8,500 may not be taxed on the value.
If the value of the items provided to a staff member is less than £50 per year, you can treat the costs of the clothes as a business gift, In that case you do not have to account for VAT on the value. The taxman may also agree that the value of the clothes is a trivial benefit which is not taxable on the employee.
However it is best to establish the position with the tax office in advance, and we can help you with that.