VAT on Baby Clothes

VAT Question

My client, who sells baby gifts and accessories, has just registered for VAT. Are these zero-rated supplies like children’s clothing? Items sold include baby sized towels, muslin cloths, blankets, shawls, booties, baby’s rattles, and toys.

VAT Answer

The general rule for clothing and footwear, which would normally be a standard rated (SR) supply, being reduced down to a zero rated (ZR) supply is that the zero-rating applies to certain garments and footwear specifically designed for and only suitable to be worn by young children.

HMRC’s guidance requires that consideration must be given to all four of the following questions when establishing if the supply can be ZR:

  • Are they clothing or footwear?
  • Are they made of fur?
  • Are they designed for young children?
  • Are they suitable only for young children?

Let’s examine the various baby items that your client offers for sale.

Baby towels and muslin cloths are not items of clothing worn by a baby, they are pieces of fabric usually used to dry a baby after a bath and, in the case of muslin cloths, used for wiping up any dribbles or spills. Therefore, their VAT treatment would remain standard rated (SR).

However, if your client was selling a towelling bathrobe (designed with a hood or sleeves for wrapping up the baby and worn by the baby as a garment), this can be treated as a ZR supply.

Again, blankets are not items of clothing, as they are usually used as a top layer or cover and may be tucked in and around a baby to provide warmth and so remain SR.

But if we take baby shawls that are designed to be worn around the shoulders or head or wrapped around a baby, they can be treated as ZR as long as they are designed, marketed, and advertised for sale to be used for wrapping up babies.

How the items are ‘held out for sale’ is really important in determining whether the VAT liability will be ZR or SR.

HMRC would look at the way the article is labelled, packaged, displayed, promoted, and advertised, including what sections it appears in within brochures or on the seller’s website or price list. e.g., if a baby shawl is advertised in a catalogue in both the baby shawls (ZR) and the baby blankets (SR) sections, then this item would incur different VAT rates.

Papooses, baby sling carriers, and shawls that are worn wrapped around the carrier’s body with the intention to envelope and carry a baby around are not considered to be baby clothing and are SR.

Booties designed to be worn on the feet by babies are generally considered to be articles of footwear and, as such, do meet the definition for ZR. Other footwear designed specifically for babies, such as boots, shoes, sandals, and slippers, can also be treated as ZR supplies.

However, HMRC does accept that footwear such as children’s fur-lined boots and other footwear made from certain untanned or undressed animal skins can also be treated as ZR.

Baby’s rattles and toys will remain SR supplies as they are neither items of clothing nor footwear, and they are not designed to be worn by a baby.

But we do need to remember that if this was the sale of both a play outfit, such as a flower girl costume, and an incidental soft toy sunflower, then the supply would all be ZR because the soft toy would be seen as incidental to the main supply of baby clothing.

However, if the SR item was not incidental to the main supply, i.e., a set containing both a rattle and a onesie romper suit, then the normal rules on single and multiple supplies would need to be considered.

Further information on the VAT treatment of clothing and footwear for babies and young children can be found in the VAT Notice 714 Young children’s clothing and footwear (VAT Notice 714) – GOV.UK (www.gov.uk)

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