Reply to: Sponsoring myself to compete in a sport

[TheCyclingProgrammer]

Just a thought. We are talking about this sponsorship being classed as an expense to the company so some tax advantage gained. Can you pay the sponsorship but not claim as an expense so no advantage?

You certainly don't have to deduct an expense when calculating your taxable profit. I'm sure many of us pay for our PCG memberships through the company which isn't tax deductible. You still potentially make a saving as you don't also have to incur personal tax to get the money out of the company.

I'd still be wary of a potential BIK charge if you're sponsoring yourself though.

[northernladuk]

Just a thought. We are talking about this sponsorship being classed as an expense to the company so some tax advantage gained. Can you pay the sponsorship but not claim as an expense so no advantage?

[TheCyclingProgrammer]

You forgot to add "In my Opinion" because I'm afraid in this case it is just an opinion.

Old chestnut - sponsoring an expensive hobby from business activities? | AccountingWEB

There was nothing in my post that was opinion - its a fact that sponsoring a connected person raises the likelihood of it being questioned. In fact, my entire point was that its HMRC's opinion that counts and whether you can convince them that its a genuine expense that matters, not what you or anybody else thinks.

[TheCyclingProgrammer]

I had patches done up with the company logo, Stuck them on his shirts and tracksuits. He was a top 20 national player and played all over the UK and Europe. He had other sponsors, so I had full playing budget with travel and all the other costs. (A lot of costs). I kept a record of all of his ranking sheets, tournament entries and expenses. I also did a company sponsorship of a local junior tournament.

At the very least talk to your accountant and see what would be acceptable, its not a stupid question.

Out of curiosity, did you get any work out of it?

You don't need to get work from it for it to be justifiable (case law backs up the position that a poor commercial decision is still a commercial decision) but it would certainly help your case if questioned.

[TheCyclingProgrammer]

I have a Ltd company, yes. Again, I have paid sponsorship and put it through the company books as sponsorship. All above board, no petty cash.

It may well be above board and as I said earlier, YourCo can spend its money on whatever it likes, but if you offset an expense against your CT bill when its not wholly and exclusively for business purposes, it could be queried and relief denied.

There are obviously circumstances where a company can choose to sponsor somebody for advertising/marketing purposes but as the HMRC guide states, if the person being sponsored is a connected person there's a higher probability of there being a non-business purpose, so there's more chance of it being queried.

If you think you could justify it when questioned, then go for it. Just be prepared to owe tax, interest and possibility a penalty when HMRC discovers you've been taking the piss.

[MyUserName]

Imagine you worked for HMRC and you saw a 1 man band doing this, do you reckon you would have a fair chance of nailing them on it?

[TheFaQQer]

You will need to do more admin to stand up the expense. But seriously do you think Coca Cola has to prove to the revenue how many extra tins of pop it sells when it runs a campaign. or did Larry have to show he sold 30M more of Oracle on the back of his America's cup sponsorship?

Generally, those companies aren't owned by one person, who is then sponsoring a family member to do their hobby.

(As an aside, Larry self-funded the Oracle team, so it didn't cost the company anything to have their name on them)

[northernladuk]

I have a Ltd company, yes. Again, I have paid sponsorship and put it through the company books as sponsorship. All above board, no petty cash.

But was it treated as an allowable expense? I can't see how it would be above board if it was judging by the post above yours.

[TheFaQQer]

If you can show that the sponsorship was genuinely for the benefit of the business, then you should be OK - see McQueen v HMRC where McQueen argued successfully that although he loved rallying and it was his hobby, there was a significant benefit to his business of the sponsorship.

Contrast that with Executive Network v O’Connor - if the "sponsorship" is non commercial then there will be questions.

You could even look at the £1.2million that Interfish spent sponsoring Plymouth Albion for an example of how what appears to be genuine sponsorship can be views at tribunal as something which should not be allowed to offset against tax.

[Clare@InTouch]

I would suggest having a read through here: BIM42565 - Specific deductions: advertising: sponsorship: purpose

specifically:

Typically (but not exclusively) there may be a non-business purpose where:

the sponsored person is a relative or close friend of the business proprietor or controlling director, or
the business proprietor or controlling director has a personal involvement in the sponsored activity (such involvement often pre-existing the sponsorship).

[oracleslave]

I've sponsored my Son in his sporting activities.

You have or a Ltd company of which you are a director has?

[oracleslave]

have to be something like Oracle to get away with it

Ahem. I pay NladyUk out of Myco's petty cash. Win/win.

[TheFaQQer]

I know a journalist in America that puts lap dances as a business expenses and then bills his client for them

But sponsorship like that you have to be something like Oracle to get away with it

Like this - Oracle Sued By Strip Club For Refusal To Pay For 'Services': SFist

[MicrosoftBob]

What, like sponsoring yourself to attend the Munich Beer Festival as long as you wear a MyCo T-Shirt? Or a Hash-a-Thon in Amsterdam?

Over to you, NLUK

I know a journalist in America that puts lap dances as a business expenses and then bills his client for them

But sponsorship like that you have to be something like Oracle to get away with it

[JRCT]

Hmm, what's this O&G line of business? Oil and Gas? Obstetrics and gynaecology? If the motorsport isn't really closely related to your business then it's probably not going to work but run it by your accountant because I'm sure they would like a good laugh.

However, if you worked on (say) designing data logging systems for race cars then sponsoring motorsport might be allowable in that it's going to be a good way to get yourself "known in the business" as well as providing valuable input to your products R&D.

All motor cars need O&G.