Tax & Sponsorship?? Help needed...
Discussion
Hi to everyone!
I'm new to this forum and also new to motorsport in general so hope someone can share some words of wisdom?
Me and my business parner are intending to race in the 750MC kit car series next season. We are both directors of a LTD company and I'm wondering if we can get the car sponsored by the company? (i.e. have our company logo & website on the car). I don't think it should be too difficult to prove that we the company will get commercial gain by having advertising on the car, but I don't really understand the implications of us directors also actually racing the car (we intend to do 4-5 races each).
If sponsorship is an option, what's the max amount that would be considered 'normal'?
Any help greatly appreciated!
Cheers,
Dylan
I'm new to this forum and also new to motorsport in general so hope someone can share some words of wisdom?
Me and my business parner are intending to race in the 750MC kit car series next season. We are both directors of a LTD company and I'm wondering if we can get the car sponsored by the company? (i.e. have our company logo & website on the car). I don't think it should be too difficult to prove that we the company will get commercial gain by having advertising on the car, but I don't really understand the implications of us directors also actually racing the car (we intend to do 4-5 races each).
If sponsorship is an option, what's the max amount that would be considered 'normal'?
Any help greatly appreciated!
Cheers,
Dylan
I think the rules are even stricter than just not sponsoring yourself-my understanding is that a company cannot sponsor someone in a sport that is a hobby of one of the controlling directors-otherwise you sponsor me i'll sponsor you agreements would be rife.
Maybe one of your suppliers might see fit to sponsor you? I'm sure you could come to some sort of arrangement ;-)
Maybe one of your suppliers might see fit to sponsor you? I'm sure you could come to some sort of arrangement ;-)
I race in the 750MC Kit car series as well, and looked into this subject a number of years ago when I set up my own Ltd Co. You're best bet is to get proper tax advice, but my understanding of it is that it is seen as a director's perk and you will get taxed one way or the other.
I tried to put my trailer through my company to claim the VAT back, and they said
however they did say that if I could prove that the advertising it provided generated additional income then they would have allowed it.Guys the best solution with all of this is to cross sponsor. i.e. you sponsor X and then he/she re-invoices you the same ammount.
Obviously this is not legal but then if you do it in a way that isn't obvious - that is to say I'd recommend you choose a partner from a different series - then it would be impossible to prove.
Obviously this is not legal but then if you do it in a way that isn't obvious - that is to say I'd recommend you choose a partner from a different series - then it would be impossible to prove.
ehasler said:In other words, if you could get customers to swear that they did business with you as a result of the racing sponsorship, then the earnings that their custom generated would be offset pro-rata against part of the sponsorship expense?
however they did say that if I could prove that the advertising it provided generated additional income then they would have allowed it.
That sounds simple. And after you've done that, sir, would you please prove to us that you have never broken any law?
flemke said:No - this was just VAT. If I could have persuaded them that a car trailer was a valid expense for an IT services company then they would have allowed me to reclaim the VAT. Unsurprisingly, my feeble "it's for advertising" didn't wash, so they got their 17.5% back
however they did say that if I could prove that the advertising it provided generated additional income then they would have allowed it.
That sounds simple. And after you've done that, sir, would you please prove to us that you have never broken any law?
Obviously this is different to paying out "advertising", but it is one way to reduce your racing bills if you can do it.
It's one thing to break a law inadvertantly or through ignorance. It's quite another thing to do so deliberately in full knowledge that what you are doing is illegal. It is even worse to advise someone else to do so.
Although igmorance of the law is never a defence, it may be taken into account by the judge before sentence is passed.
We live on a very different world compared to even two years ago. Apart from the infringement of the actual tax laws themselves, you now have to be aware of the much more potentially serious breaches of the Proceeds of Crime Act and Money Laundering Regulations - which now apply to EVERYONE.
Although igmorance of the law is never a defence, it may be taken into account by the judge before sentence is passed.
We live on a very different world compared to even two years ago. Apart from the infringement of the actual tax laws themselves, you now have to be aware of the much more potentially serious breaches of the Proceeds of Crime Act and Money Laundering Regulations - which now apply to EVERYONE.
Hang on a minute I think we need to put some context around this because I think it is starting to get a little serious.
Firstly this website is a bit of light relief for 99% - and half the time you can spend hours (if you wish) debating X is better than Y with an 8 year old.
Getting back to the point - the guy asked for a bit of advice re: motorsport sponsorship, at 750MC level. He'll probably spend £10KGBP, so how come we suddenly bring up money laundering and proceeds of crime acts up??
Come on - I thought that this was a forum to give real world advice not get beaten up by tax inspectors or other local authority representatives.
You'll be telling people that exceeding 70mph on the motorway means you're a child killer next.
Firstly this website is a bit of light relief for 99% - and half the time you can spend hours (if you wish) debating X is better than Y with an 8 year old.
Getting back to the point - the guy asked for a bit of advice re: motorsport sponsorship, at 750MC level. He'll probably spend £10KGBP, so how come we suddenly bring up money laundering and proceeds of crime acts up??
Come on - I thought that this was a forum to give real world advice not get beaten up by tax inspectors or other local authority representatives.
You'll be telling people that exceeding 70mph on the motorway means you're a child killer next.
In actual fact, people do come on here asking serious questions about serious topics - including tax and business type subjects. I understood this particular question to be in the latter category and therefore warranted a serious and meaningful reply. The question was also raised on the Business Forum, reinforcing my assumption that he wanted serious advice.
"I was only joking m'lud" may not cut a lot of ice ina court of law. And you might be surprised the lengths of time and effort the Inland Revenue will expend to chase £500 let alone £10,000.
I am not talking theoretically here. I have been involved in tax investigations which, after 18 months of queries, letters and meeting with the IR have yielded either no tax at all or very little.
>> Edited by Eric Mc on Wednesday 23 November 10:51
"I was only joking m'lud" may not cut a lot of ice ina court of law. And you might be surprised the lengths of time and effort the Inland Revenue will expend to chase £500 let alone £10,000.
I am not talking theoretically here. I have been involved in tax investigations which, after 18 months of queries, letters and meeting with the IR have yielded either no tax at all or very little.
>> Edited by Eric Mc on Wednesday 23 November 10:51
Best to deal in facts here-consequences are pretty severe if you mess it up.
From Inland revenue website
"Where smaller companies, partnerships and individual traders undertake sponsorship it is possible that the business purpose was not the sole purpose.
A non-business purpose is likely where
a sponsored sportsperson is a relative of the business proprietor or controlling director,
or
the business proprietor or controlling director has a personal hobby involvement in the sponsored activity. "
[url]www.hmrc.gov.uk/manuals/bimmanual/BIM42555.htm[/url]
I don't think you should
a)sponsor yourself
b)"swap" sponsorship with someone else.
try to be more imaginative.
From Inland revenue website
"Where smaller companies, partnerships and individual traders undertake sponsorship it is possible that the business purpose was not the sole purpose.
A non-business purpose is likely where
a sponsored sportsperson is a relative of the business proprietor or controlling director,
or
the business proprietor or controlling director has a personal hobby involvement in the sponsored activity. "
[url]www.hmrc.gov.uk/manuals/bimmanual/BIM42555.htm[/url]
I don't think you should
a)sponsor yourself
b)"swap" sponsorship with someone else.
try to be more imaginative.
Guys while I don't belittle anything you have said on a serious viewpoint I think if you apply the strict guidelines then it surely means that if a director of Vodaphone has an interest in football or F1 then their is a breach, if a director of Red bull has an interest in any sporting activity (as they sponsor so much) then that too is a breach - so where is the line drawn?
The tax rules do not stop you having a personal "interest" in an activity your company might support. What the Inland Revenue don't like is when you use the financial resources of a company or business which you control to help pay for something which is obviously a hobby or a pasttime. In fact, they don't mind AT ALL if you do these things provided you are up front about it and divulge the monetary value of the amounts expended on such activities and pay the correct tax and NI if appropriate.
If you are a director of a quoted company you could very well in breach of stock market regulations as well if you used the company's money to pay for personal leisure activities.
If you can argue that the expenditure has a valid business aspect to it, well, that's something you might have to argue with the tax man about. Like a lot of aspects of running a business, it's down to the businessman to decide where he is going to take various business risks.
I have some experience in dealing with tax investigations surrounding these types of issues and I know the areas the Inland Revenue are sensitive about - and the arguments you can throw back at them. I managed to get a client off the hook over the funding of a yacht for "business purposes".
If you are a director of a quoted company you could very well in breach of stock market regulations as well if you used the company's money to pay for personal leisure activities.
If you can argue that the expenditure has a valid business aspect to it, well, that's something you might have to argue with the tax man about. Like a lot of aspects of running a business, it's down to the businessman to decide where he is going to take various business risks.
I have some experience in dealing with tax investigations surrounding these types of issues and I know the areas the Inland Revenue are sensitive about - and the arguments you can throw back at them. I managed to get a client off the hook over the funding of a yacht for "business purposes".
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