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Knowing me, knowing uniform

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We now know that ABBA wore outrageous clothes because they could claim a tax deduction in Sweden if their stage clothes were unsuitable for ordinary use.

Somebody appears to have tipped off the Office of Tax Simplification about the wheeze, because its report last month on improving expenses and benefits tax included the idea of what we might now term ‘ABBA-Lite’.

Clothes are generally dual purpose, providing warmth and decency. When a British barrister once claimed a tax deduction for her court clothes, on the grounds that she would not ordinarily wear anything like them when not working, her claim was refused. As well as putting her into the appropriate professional ‘uniform’, they provided warmth and decency, so she couldn’t say she had spent the money wholly and exclusively for professional purposes, and she could not claim tax relief (Mallalieu v Drummond [1983] STC 665).

The test for employee expenditure is tougher. Apart from a few specific types of expense, relief is only given for money spent wholly, exclusively and necessarily in the performance of the duties. So would ABBA have been able to claim in the UK?

There is a fine line to tread: you would hardly be able to claim for a business suit, but you would probably have little difficulty persuading the taxman to give relief for your Widow Twanky outfit for your appearance in panto.

The dividing line is sometimes hard to define, and some employees have to argue with the tax office. Protective boots and hi-vis wear are easy, but what about the uniform jacket and skirt that don’t carry the company logo? Or the shop assistant’s overalls?

The OTS has very sensibly concluded that HMRC ought to agree more readily to reasonable flat-rate expense deductions, and even that employers ought to be able to give the relief at source through reduced payroll deductions.

It is clearly not envisaging relief for the amounts a 1970s pop group will have spent on ‘work clothes’, but saving employers and HMRC a lot of unproductive time on small amounts of money would have to be an overall improvement.