Tax benefits of sponsorship?

[BMR]

I've heard a few people talk of this but there never seems to be any definitive explanation of exactly what can be done - maybe due to the tax man not wanting it to be well known, or my theory - it's an absolute minefield of pitfalls for potential sponsors?

I'm currently looking for a modest budget to race Fiesta's next year - I've contacted many companies and about 20% have got back to me. All unfortunately no - the current recessions was mentioned in each of their reply's and some said they simply do not get involved with motor racing.

[lewis1]

You wont find much money to race a fiesta, its not on the so called motorsport ladder. It has basically no coverage, and 90% of people on the grid are doing it on there own. Sponsors wont want in to something like that no matter what the tax benifits are

[BMR]

I know that and it's why I've not went to them with the "get a sticker on my car to race in front of 100 people" slant, more of a sponsor me and you will have access to me and the car and be able to bring along yourself and clients to trackdays.

[TimCrighton]

Advertising can be offset against corporation tax liabilities I believe. Best person to ask is Eric Mc in the business forum.

For the reason above most people that pay for their own racing and pay for it through a business invoice it as 'advertising' or 'hospitality'.

[stockhatcher]

if you set yourself up as a company for motor racing purposes, or you already are a company, then getting sponsorship can reduce your cost of racing as you can claim VAT back on all your purchases. I.e the sponsorship is income and therefore tax on any costs can be reclaimed

[BMR]

I've seen a few other racers set up as Ltd companies - so even if I have a paltry turnover can I still claim the VAT back on goods for racing purposes? Do I not need a certain turnover before being VAT registered?

[stinkysteve]

Yep, I think it's over £30k turnover before you can become VAT registered as a Ltd company.

On sponsoring yourself through your own company, I've looked at this (although not in complete detail) and i'm under the following impression:

You have to be able to prove to the tax man that the 'advertising' your company is paying to you is worthwhile and a better advertising deal could not be found elsewhere.

So if your company pays £10k for a small sticker on your fiesta, and you could get a large sticker on a touring car for £5k, (example numbers obviously!!!) then the tax man will say you'v got an ulterior motive for sponsoring yourself, and as such tax benefits will be disallowed.

However sponsoring can take more forms, such as hospitality/entertaining and so i'm sure there will be ways around. I just haven't found any (neither have my accountants).

Obviously you're in a better position if your company sells something like Motorsport brake pads than say horse riding equipment.

Having said all this, i met a guy recently who said there were ways. He races successfully in national rally championships. Once i catch up with him and know better i'll be happy to explain what i learn. (although maybe off public forums - depending on how close to the wind his accountant sails)





edited for spelling.

Edited by stinkysteve on Tuesday 27th October 12:12

[BMR]

I don't have my own business to sponsor me anyway (fortunately or unfortunately!) - although a potential sponsor is a close relations business. Just depends if they are on course to make a profit or not.

Thanks for taking time to offer your advice.

Edited by BMR on Tuesday 27th October 12:26

Edited by BMR on Tuesday 27th October 12:26

[fergus]

stinkysteve said:

Yep, I think it's over £30k turnover before you can become VAT registered as a Ltd company.

Is it not the case that you *expect* sales to be more than £30k/year?

[stinkysteve]

fergus said:

stinkysteve said:

Yep, I think it's over £30k turnover before you can become VAT registered as a Ltd company.

Is it not the case that you *expect* sales to be more than £30k/year?

quick look on hmrc website shows it's actually £68000 P.A. But that's the threshold where you MUST become VAT registered. (subject to a whole host of other guidelines). Or if you expect more than £68k T/O in the next 30 days.

You can actually become VAT registered before then voluntarily - I didn't know that.

Learn something new....etc!

[Graham]

BMR said:

I've seen a few other racers set up as Ltd companies - so even if I have a paltry turnover can I still claim the VAT back on goods for racing purposes? Do I not need a certain turnover before being VAT registered?

Very dodgy ground, as unless you can actually prove that the company is setup to make a profit. If its just setup to loose money and pay for your racing, you'll end up getting a big benifit in kind tax bill from hmrc. there could also be issues if technically trading insolvently as well !!!

[carl_w]

Check out the McQueen case, McQueen v R & C Commrs (2007) Sp C 601.

HMRC initially disallowed the expenditure on the sole trader's rallying activities, but it was overturned by the Special Commissioners.