Reply to: Sponsorship / donations from Ltd Co

[BrilloPad]

A £500 advertising or donation cost is hardly likely to draw a significant amount of attention to your company.

From HMRC are you? Once they pick on a company, they often dig deep. Not always, but often. Why take the risk over a few quid?

[SouthernHarrier]

Because you're saving ~45% tax by being able to spend it using your companies pre-tax income?

This, and its just always been the case that companies rather than individuals sponsor the barrels. Companies then get a small advert in the brochure. Given the doom and gloom outlook here though maybe I need to start looking at my pint glass as half empty!!

[craigy1874]

A £500 advertising or donation cost is hardly likely to draw a significant amount of attention to your company.

[BrilloPad]

Because you're saving ~45% tax by being able to spend it using your companies pre-tax income?

Agreed. However there is clearly a fine line involved here. Read the posts above. I try to get as little attention paid to my tax affairs as possible these days. So do several others I know having been bitten before by trying to push the envelope.

I suspect the most HMRC will do it denote it as a BIK. However they might dig further.

[vwdan]

Why not pay it personally? Why attract attention to your limited?

Because you're saving ~45% tax by being able to spend it using your companies pre-tax income?

[BrilloPad]

I sponsor a barrel of beer at my rugby club annual beer festival. Have never worried about to be honest. My eldest has just started mini rugby so I hope he's not benefiting from this!!

Why not pay it personally? Why attract attention to your limited?

[SouthernHarrier]

I sponsor a barrel of beer at my rugby club annual beer festival. Have never worried about to be honest. My eldest has just started mini rugby so I hope he's not benefiting from this!!

[TheFaQQer]

As a director isn't it up to me what I do with my company's money once all CT and other liabilities are met?

Yes.

The problem that you will have is determining accurately what the liabilities and CT are and making sure they are paid for properly.

[WordIsBond]

Is it a CASC? You can get gift relief with that - https://www.gov.uk/government/public...guidance-notes

If not, what about helping making it one?

Great artistic idea.

[Iliketax]

My kids both play for the local rugby club and I want to make a donation from my Ltd Co to the club. The club is not a registered charity.

Is it a CASC? You can get gift relief with that - https://www.gov.uk/government/public...guidance-notes

If not, what about helping making it one?

[northernladuk]

Thanks all for your input.

Perhaps I shouldn't have mentioned my own kids are involved as it does muddy the waters.
The money would simply go into the pot at the rugby club for general needs such as training the coaches, buying equipment etc.
I will not benefit directly or indirectly and neither will my company.
Without such cash input / sponsorship (on top of subs) the club simply isn't viable.

Basically I want to my company, from its post-corporation tax profits, to give some money to a local community organisation - ie use option 2 in my original post. I'm not (now option 1 is discarded) looking at this as a way to reduce my CT.

As a director isn't it up to me what I do with my company's money once all CT and other liabilities are met?

If I want to withdraw all my post tax profits as cash and burn it on the street rather than pay it to myself as dividends isn't that my business as the director? An extreme example I know but it illustrates the point. What would HMRC's view be of that?

Support your kids and the club and forget the tax element. There is more in life to worry about. Don't let the tax tail wag the dog.

[Jessica@WhiteFieldTax]

An extreme example I know but it illustrates the point. What would HMRC's view be of that?

Well, a company as a non natural person cannot light a match, so I would suggest that its dividends you've taken out and burned in the street. That's 7.5% please.

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In the substantive issue, my view is that people tend to stress too much in small issues like this. HMRC are unlikely to query it in a simple cost/benefit basis. "Sponsorship" becomes a problem with big ticket stuff - horses, cars, boats - or obvious extravagance / entertaining value.

I remember my first interview for an accountancy job, 31 years ago - the guy said "Accoutancy is an art not a science let people don't appreciate that".

The art is different depending on whether it's £500 / £5,000 / £500,000.

[MrLoveBucket]

Thanks all for your input.

Perhaps I shouldn't have mentioned my own kids are involved as it does muddy the waters.
The money would simply go into the pot at the rugby club for general needs such as training the coaches, buying equipment etc.
I will not benefit directly or indirectly and neither will my company.
Without such cash input / sponsorship (on top of subs) the club simply isn't viable.

Basically I want to my company, from its post-corporation tax profits, to give some money to a local community organisation - ie use option 2 in my original post. I'm not (now option 1 is discarded) looking at this as a way to reduce my CT.

As a director isn't it up to me what I do with my company's money once all CT and other liabilities are met?

If I want to withdraw all my post tax profits as cash and burn it on the street rather than pay it to myself as dividends isn't that my business as the director? An extreme example I know but it illustrates the point. What would HMRC's view be of that?

[northernladuk]

I see WiBs point but a set up like that doesn't really compare with a rugby club IMO. I think the devil is in the details here. I donate to the junior section of my old rugby club. The sponsorship money is used to buy the shirts the boys play in. If that is the case then it's pushing a very fine line where he's actually buying his kids shirts but with a logo on. It's not advertising at all, everyone at the club knows.

I don't have anything to do with the junior teams, I just decided to sponsor the team I started with many years ago.

I would be willing to bet the sponsorship will affect his kids and the others in the team so far too much involvement to be pure sponsorship IMO.

[WordIsBond]

The only justification I can think of (which is perhaps what the OP might try to argue) is that whilst it's doesn't qualify as a charitable donation, it's still charitable. Still, if I was an aggressive tax inspector, I'd be thinking why are you gifting money to this club that your kids play at and not any other club...doesn't that demonstrate there must be some personal benefit? Or is it purely coincidence that it's the club his kids play at?

I'd argue that any personal benefit argument is far-fetched. If my nephew goes into a charity-run drug treatment centre and I contribute to the charity because I'm grateful for what they've done for my family, and I believe in the work they do, it's still a charitable contribution. The fact that this organisation isn't a registered charity shouldn't really have any impact on the personal benefit angle.

If the kids aren't allowed to play with the club unless he makes the contribution, that's another matter. But if it is generally available to the community, and the kids have been part of it prior to this, he's not buying a personal benefit, he's supporting an organisation that he's seen doing good work in the community.

I can certainly see HMRC chasing it if he tries to claim it as a business expense. But chasing it as a BIK? If it is treated as a BIK, then it DOES become a business expense. So they'd lose the CT that he wasn't trying to claim, and gain employer NI, plus MAYBE 20% income tax (or maybe only dividend tax, if OP's salary is only £8K).

The gain would be almost nil. They'd look like the Grinch that stole Christmas, and stole it over a pittance.