VAT on clothes and footwear

Whether you are selling clothes or buying clothes, you should assume that if the clothes are for adults, VAT is chargeable at the standard rate of 20%.

However, as is often the case when dealing with VAT, there are exceptions, although these are limited.

VAT on second-hand clothing and footwear

The sale of clothing or footwear which has been donated is zero-rated if the following conditions are met:

• The clothing/footwear has been donated to a charity or trading subsidiary of a charity.
• The clothing/footwear has been made available to the general public or to 2 or more persons who are disabled or receiving certain means-tested benefits.

VAT is chargeable on the sale of second-hand clothing/footwear in a shop or by an online retailer, but a buyer may not be aware of this if the seller is using the second-hand margin scheme.

It is common for sellers of second-hand goods, particularly online, to be trading below the VAT registration threshold and, as such, cannot charge VAT. Income from the sale of second-hand goods counts towards the seller’s taxable turnover figure for VAT registration purposes.

VAT and protective boots

Protective boots are zero-rated when supplied by a manufacturer to a wholesaler who in turn supplies them to a retailer or sold by an employer to their employees, but only if all the following conditions are met:

• they satisfy the requirements of regulation 8(2) of the Personal Protective Equipment Regulations 2002
• they show a mark indicating conformity with regulation (8)(2) of the Personal Protective Equipment Regulations 2002
• they are for industrial use.

Protective boots sold to employers for use by the business’s employees are not zero-rated, and VAT at 20% must be charged to the employer.

The zero rate applies specifically to protective boots, and therefore, protective shoes are not eligible for zero rating, even if they meet all the other requirements.

Children's clothing and footwear

Children’s clothing and footwear are zero-rated if the following conditions are met:

• They are articles of clothing or footwear.
• They are specifically designed for young children.
• They are only suitable for young children.
• They are not made of fur.

You can learn more about VAT on children's clothes in our blog.

Reclaiming VAT on clothing and footwear

Businesses purchasing clothes for employees can only reclaim the VAT incurred in certain circumstances.

VAT paid on uniforms (including wigs, gowns and bands worn by barristers) or protective clothing worn in the performance of their duties by someone who is registered for VAT or by employees of a VAT-registered business can be reclaimed subject to normal input tax rules.

VAT on other clothing/footwear provided to employees may also be reclaimed. Still, if the employee becomes the owner of the clothing/footwear, the business has made a supply for VAT purposes. VAT must be accounted in most cases. It is advisable to seek professional advice as there are specific rules on establishing the value of such supplies, which impacts VAT treatment.