Introduction »

A cut above the rest?

A recent tax case concerning a BBC newsreader goes to show just how difficult it is for employees to obtain tax relief for costs they incur in doing their job.

Certain rules which relate to employees only allow tax relief for costs ‘…incurred wholly, exclusively and necessarily in the performance of the duties.’ The courts have interpreted these words extremely narrowly over the years, as seen in the case of Sian Williams. The BBC television newsreader claimed certain deductions in respect of ‘travel and subsistence costs’ and ‘other expenses and capital allowances’. Of these, the following items remained in dispute:

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

The taxpayer claimed that these expenses were allowable expenses as incurred wholly, exclusively and necessarily in the performance of the duties. The Tribunal found that:

‘Even if the Appellant was required by her work to appear with her hair dressed to a certain standard, and even if she would, if asked, have stated that she was having her hair done because of those requirements of her profession, the hairdressing services were also something that she needed as a human being.’

So, costs incurred which have a dual purpose are unlikely to obtain relief. HMRC have agreed that particular deductions for clothing and equipment can be made from earnings for certain occupations. HMRC negotiates these flat rate deductions with trade unions to apply to certain classes of employees. The flat rate amounts are intended to represent the average annual expense incurred by that class of employees on the repair and replacement of work equipment, such as tools and special clothing.

The flat rate amount is only deductible where the expense falls on the employee and where the employer reimburses part of the expense, the deduction is reduced accordingly.

How do you know if you or your employees work in one of these areas? Can you get a free handout from HMRC for this year and possibly the last four? Well to view an up to date list of occupations and amounts, please visit www.hmrc.gov.uk/manuals/eimanual/EIM32712.htm

Alternatively, please feel free to get in touch to discuss this further.

Introduction »