Author: Dave Beattie
It’s surprising that the provision of uniforms still creates consternation for HR and payroll practitioners as the tax guidelines are very simple. We have however seen a trend developing where employers try and push the boundaries as to what is acceptable to SARS. This is therefore a good time to re-look at how SARS interprets the legislation in this regard.
As a rule, the provision of uniforms to employees is not regarded as a fringe benefit if they are required for work purposes and would be regarded as unsuitable for use as everyday attire (see section 10(1)(nA) of the Income Tax Act). Even if an employer mandates a dress code, the provision of chinos and a fashionable golfer would not be regarded as a uniform as it could be used as everyday attire. This would constitute a benefit to the employee and be regarded as a taxable fringe benefit.
So, let’s take a look at the conditions that must be met to ensure that uniforms aren’t regarded as a taxable fringe benefit:
- Distinctive clothing: The uniform must be easily distinguishable from ordinary clothing. A company-branded uniform for a security guard or an artisan’s overalls would likely qualify, but a dress code requiring the unbranded chinos and golfer mentioned above wouldn’t. A branded golf shirt would qualify as it’s distinguishable from an unbranded golfer.
- Condition of employment: Wearing the uniform must be a mandatory condition of employment. This should be clearly stated in the employment contract or company policy.
- Reasonable allowance: Any allowance paid to the employee for the uniform must be a reasonable amount based on the circumstances.
- Reporting requirements: Even if the benefit is exempt from tax, it must still be disclosed on the employee’s tax certificate (IRP5/IT3(a)) under code 3714 – other non-taxable allowances.
Drawing the ire of SARS will generally happen if their auditors start to see a pattern of non-compliance – and this can include relatively insignificant issues such as company uniforms. Best practice would be to establish a watertight uniform policy in your policy and procedure document, and clearly state that it’s a company requirement in the employee’s letter of employment.
Email us on [email protected] with any of your tax questions.