VAT: Blanket with sleeves is clothing

Children's clothes
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Neil Warren reviews a case concerning a comfy blanket designed for wearing indoors, and considers whether there is scope for more zero-rating of children’s clothing.

In the case of Character World Ltd (TC06634), the first tier tribunal (FTT) had to decide if a “sleeved fleece” was an item of clothing and therefore qualified as zero-rated when sold to children. The tax involved was substantial; HMRC had issued an assessment for £157,579 to cover VAT periods between August 2013 and March 2016.

However, the legislation is flimsy. The part dealing with children’s clothing is based on one sentence; to consider if the items are “articles designed as clothing or footwear for young children and not suitable for older persons.” (Item 1, Group 16, Sch 8, VATA 1994). The key words are “designed”, “clothing” and “young children”.

What is a sleeved fleece?

The first challenge for the court was to understand the appearance and key features of a sleeved fleece which can best be described as a full-length blanket with sleeves, with an opening on the garment which could either be worn at the front or back of the body. Can you picture it?

The fleece garment often includes Disney characters in the designs aimed at children aged between 3 and 10, with pop stars on items for those between 10 and 13. It was accepted by all parties that garments for people aged 14 or over are classed as adult clothing so are standard rated anyway (VAT Notice 714, para 4.2).

Opposing views

HMRC decided that a sleeved fleece is not an item of clothing and described it as a “rectangle of cloth with sleeves”. HMRC also said it could not be worn properly because its length was a “tripping hazard.”

Character World Ltd explained that the intention was for the garment to be wrapped around the body and worn around the house, to give warmth and protection to the user. The incorporation of sleeves meant it was always the manufacturer’s intention for the garment to be “designed as clothing”.

The decision

The court ruled in favour of Character World Ltd and concluded that the garment was “more than simply a blanket” and that “it keeps the user warm and can preserve the user’s modesty”.

Learning points

Some 30 years ago, I was the Customs & Excise (pre-HMRC) VAT officer in charge of the VAT affairs of a major UK retailer, and clothing was their biggest market. We often used to study garments in great detail (helped by tape measures to check various waist, chest and leg measurements) to see if they were zero-rated as children’s clothing. As I recall we never had to deal with the challenge faced by the court in this case, ie whether a garment was actually clothing or otherwise.

Times and fashions have moved forward, so I wonder if there a whole range of garments in the modern market that could be defined as clothes, and therefore zero-rated if the sizes and style are restricted to children?

Three tips to consider

  • Always focus on the intentions of the manufacturer (usually clear by labelling and packaging) – did he intend the item to be worn as clothing?

  • What features restrict it to children only – usually size although Disney characters in the material also help.

  • Can it actually be worn – for example, my gran used to wear a shawl (definitely clothing) but you would never wear an umbrella, even though the latter gives you more protection from the Manchester rain!

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.

About Neil Warren

Neil Warren

Neil Warren is an independent VAT consultant and author who worked for Customs and Excise for 14 years until 1997.

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22nd Sep 2018 09:58

I'm surprised that there was ever any doubt here.

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26th Oct 2018 15:29

Duplicated post text removed. Can't see a way to delete

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24th Sep 2018 11:37

"As I recall we never had to deal with the challenge faced by the court in this case, ie whether a garment was actually clothing or otherwise. "

A GARMENT by definition IS clothing.

The dispute here was presumably whether this item was clothing or bedding. Though as others have said it seems blatantly obvious. Unless, perhaps, the sleeves were for use in bed?

There seems scope to present character bedding items as child clothing - shawls, say?

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to brown-yuk
24th Sep 2018 12:03

Beds don't have arms.

But armchairs do.

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24th Sep 2018 12:29

Is there a similar issue then on the towels being sold with slits for armholes and a hood in the centre?

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24th Sep 2018 13:09

Why is 14 the cut-off age for children's clothing and shoes? Is there any other area of the law where 14 is the watershed between childhood and adulthood?

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to C.Y.Nical
25th Sep 2018 10:29

I don't know if it is still the case, but when I was growing up some 50 years ago, bus fares, train fares and cinema entrance all changed at 14. I think it was a throw back to when the school leaving age was 14. Therefore you could get a job and so were considered financially grown up enough to pay the adult price. As far as clothing goes now, most 14 year olds are adult size.

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to C.Y.Nical
25th Sep 2018 12:03

The towels with slits and holes in them (referenced above by Marion) shouldn't be marketed to anyone except adults. Even then, only in special shops!

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to AnnAccountant
25th Sep 2018 14:45

I'm not sure what you have in mind but a towel with hood is great for drying children. Very hard to say if it is clothing. I actually would say not as its primary function is drying. But you could argue that it is a poncho. Or a dress if sides are closed below the oxter.

Golfers use towels with a hole which they hang over their equipment.

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to AnnAccountant
26th Oct 2018 11:02

They're used all the time by swimmers and triathletes - adult or child.

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to bendybod
26th Oct 2018 11:13

I would've thought that would've slowed their swimming down.

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25th Sep 2018 12:34

I have just looked at my bedding and its definitely not a blanked, nor sheet, nor Duvet cover nor...............

Its one of those thing easy to say whats its not but a bit more tricky to say what it is. Right decision for me though. HMRC have won a lot of court cases lately, getting over confident?

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to AndrewV12
25th Sep 2018 14:38

Then what is it? Can you link to one for sale?

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to brown-yuk
25th Sep 2018 15:11

brown-yuk wrote:

Then what is it? Can you link to one for sale?

There's a website called Google - don't know if you've heard of it. Just type in "Blanket with sleeves".

https://www.ebay.co.uk/b/Blanket-with-Sleeves/175750/bn_3202001

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to lionofludesch
26th Oct 2018 15:46

"Google"? May have heard of it. I'll Ask Jeeves. Or Bing.

Your link shows lots of "b with s" variants. I was asking what AndrewV12 referred to when he said

"I have just looked at my bedding and its definitely not a blanked, nor sheet, nor Duvet cover nor..............."

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