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Court Rules that Blankets with Sleeves are Clothing in VAT Case

2018-09-24T00:00:00+01:00
Written By: , Filed under: HMRC on:
Court Rules that Blankets with Sleeves are Clothing in VAT Case

A first tier tribunal court has ruled that blankets with sleeves designed for use by children ought to be considered as clothing for taxation purposes.

HMRC had been demanding over £157,000 in VAT payments from a company called Character World Ltd in relation to money made from the sale of sleeved fleeces between August 2013 and March 2016.

The assessment of the tax authorities was that the items in question should not be considered clothes for children, partly because they would represent a “tripping hazard” if worn in that way.

Character World challenged that view in court, with the adjudicators eventually taking their side and ruling that the items were always “designed as clothing” and should legally be considered as such.

An assessment of the case posted on Accounting Web has suggested that there may be other situations in which manufacturers could be entitled to see certain wearable products zero rated as far as VAT is concerned.

“Overall, I suspect there could be scope for a bit more zero-rating in the clothing market and it is worth giving it a few minutes thought,” wrote Neil Warren, author of the review and a VAT expert.

Among the key issues considered by the court was whether or not the blankets with sleeves were specifically created for use by children, with the distinction having direct relevance for VAT considerations.

It was made clear that the designs of these items often included images of Disney characters or pop stars and were, therefore, clearly recognisable as products aimed at children.

The court’s conclusion made reference to the garments in question being “more than simply a blanket” and the decision was made that they should clearly be viewed as items of clothing.

A single sentence in the relevant VAT legislation was cited to determine the outcome of the case, with zero ratings to be applied to “articles designed as clothing or footwear for young children and not suitable for older persons”.

Ultimately, it was decided that Character World’s items were indeed clothes that were clearly designed with use by children in mind and are not as mere blankets or garments for adults.

David Tattersall
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