In Ms Sian Williams v HMRC TC 00397 a clothing case has made the Tax Tribunal. This one involves a TV newsreader "the smart-casual look". Disappointingly for tax-buffs she is an employee, unsurprisingly no deduction is allowed.

In her 2004/05 tax return, a newsreader claimed certain deductions from employment income with the BBC for "travel and subsistence costs", and "other expenses and capital allowances".

Of these, the following were in dispute: 

  • Professional hairdo and colouring £975
  • Professional clothing for studio    £3,231
  • Laundry of professional clothes   £325

She also claimed that as a taxpayer she had the right to be treated fairly, HMRC should offer up details of the amounts which had been agreed as allowable expenses for other news readers and entertainers.

The Tax tribunal disallowed all claims and rejected the request for fairness.

Section 336(1) ITEPA provides:

(1)   The general rule is that a deduction from earnings is allowed for an amount if—

(a)   the employee is obliged to incur and pay it as holder of the employment, and

(b)   the amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment.

The Tribunal found that:

  • Her clothes were “not of a special character”, they were the same as worn “off-duty”  and not uniform or costume
  • There were no express terms concerning clothing in her contract.
  • Laundry and hairdressing was disallowed: an employee is not performing her duties when her clothes are being cleaned or when she is sitting in a hairdressing salon.

It is impossible to divide the business and private benefit of such expenditure such that no apportionment is possible

The right of taxpayers to be treated fairly

The taxpayer complained at the refusal by HMRC to provide information on what claims for clothing have been made and allowed by HMRC in respect of other TV presenters.

The Tribunal however, found that it must determine this appeal in accordance with the law, and not in accordance with how HMRC have dealt with similar situations in the case of other taxpayers. 

Claim for plant and machinery Section 36(1) CAA 2001

Section 36(1) CAA provides that:

(1)   Where the qualifying activity consists of an employment or office—

(a)   expenditure on the provision of a mechanically propelled road vehicle, or a cycle, is not qualifying expenditure, and

(b)   other expenditure is qualifying expenditure only if the plant or machinery is necessarily provided for use in the performance of the duties of the employment or office.

Were the clothes part of the setting or the apparatus of the trade? Well, in J Lyons & Co Ltd v. Attorney-General [1944] Ch 281, [1944] 1 All ER 447 Uthwatt J said:  "Whether any particular article more properly falls within "plant" as thus understood or in some other category depends on all the circumstances of the case."

Very little appears to have been advanced in the way of argument on this point. The Tribunal found that as the clothing was disallowed for the purposes of employment income, it was therefore not expenditure was necessarily provided for use in the performance of the duties of the employmemt or office.

Our verdict:
No surprises about the lack of tax deduction for casual clothes, laundy and hair. Perhaps she would have managed a claim had she restricted it to smart jackets.

A pity that the Capital Allowances question was not argued because the legislation says "necessarily provided", which is quite different from the ITEPA wording of incurred wholly, exclusively and necessarily".

But what about the fact that the Taxpayers' Charter is now the law? Taxpayers should be treated fairly or are there different definitions of fairness floating around which we have missed? If HMRC is obliging other TV presenters with clothing allowances then they should, in the interests of fairness publish this intellegence.

Useful links: Ms Sian Williams v HMRC TC 00397