Insights

If you work from home or run a home-based business and are reasonably well informed, you will be well aware of what you can and can’t claim as business expenses. In a nutshell, you can claim for phone calls (B2B and calls to customers and suppliers) but calling auntie in Melbourne is a definite no-no.

Then there’s your place of work. If you have a home office or need to work at home, you are not entitled to help with furnishings, but you can claim for the phone and internet line.

What "tools and equipment" can you claim for?

These rules all seem pretty self-explanatory but there are some definite grey areas when it comes to some expenses. Although there are firm rules as regards what “tools and equipment” can be claimed for, taxpayers’ entitlements to claim for clothing worn at work can seem a little less clear cut. Recent cases brought before the tax tribunal demonstrate that many people think HMRC’s guidelines are actually too strict.

Three friends and three very different careers

Let’s consider the rules in context, using three friends as an example.  There’s the young barrister, let’s call her ‘Miss M’. On leaving law school, she finds herself in the enviable position of being offered a pupilage in lawyers’ chambers. Having spent much of her life as a student, it comes as something of a shock when she finds herself having to buy the sort of sober clothing that her new professional life demands. She assumes that because these button-down suits are leagues away from her every day wear, and even what she regards as “normal” office wear, she is entitled to claim tax relief. Not so.

HMRC takes an extremely pragmatic and practical view – possibly too exacting for some - that just as we need food to live, we need clothes for “warmth and decency”. Her workwear might be very formal, but it can potentially be worn anywhere and it is not necessary to restrict the usage to working hours. Similarly, she can’t claim laundry or repair costs, as that would be acknowledging that her outfits fall into the uniform category, which they clearly don’t.

So Miss M’s smart, plain suits don’t qualify, because she can wear them outside work and she bought them from a high street retailer. However, move on a few years to when she becomes a QC, and she is fully able to claim for her wig and gown.  Let’s be honest, most people in her position wouldn’t pop out to buy a coffee with their court wig on, so we can safely categorise that as outside normal office wear.

Miss M’s school friend, ‘Miss P’, takes a different career route and decides to become a plumber. After qualifying, she is apprenticed to a large local firm and finds herself wearing the firm’s logo-ed polo shirt. Since this is purely intended for work, her boss is able to claim relief because the logo immediately transforms the item into the category of uniform. If her boss had foregone the logo and simply supplied plain polo shirts, tax relief could not be claimed, as his employees would be in nothing more than daily casual attire. When she eventually becomes self-employed, Miss P can also claim tax relief for overalls from a specialist workwear shop, as well as her arsenal of wrenches and sink plungers.

The third friend, ‘Miss X’, makes a move into the entertainment industry as a burlesque dancer. Her tax relief case is the most clear cut – transparent even - of all. She is an adult entertainer and all her costumes are viewed quite simply, as uniform. She could not feasibly meet friends for coffee or lunch in her tassels, plus her outfit doesn’t fulfil HMRC’s “warmth and decency” definition. And as with Miss P, she is also able to claim for washing and mending.

Unsure? Take the 'Cappuccino Test'

If you are unsure about claiming for business expenses, HMRC publishes a detailed guide, including a list of careers and jobs. It’s pretty extensive and covers everything from airlines to woodworkers.

If you remain unsure about how to judge if you should and could claim, it is helpful perhaps to consider the basic ‘Cappuccino Test’ and where your profession sits in relation to the ‘three Ps’ as benchmark: pilots, plumbers and performers.