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Buying a Racing Car for Sponsorship

Is this a simple motor purchase or are their other considerations?

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This is a new one for me ... my client is considering buying a car which will be entered into UK track racing series. The car will carry significant sponsorship/ advertising for my client (only). The car will be road legal and driven only between race tracks and a storage location. Is this just a simple motor asset purchase or is there a more favourable treatment?

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By atleastisoundknowledgable...
25th Jun 2018 07:31

Who will be driving it & what is their relationship with the client? This is key.

There was a case a number of years ago where a company bought a horse box for the director’s daughter (?) and slapped their advertising all over it. HMRC disallowed the cost, a decision which was upheld.

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By johngroganjga
25th Jun 2018 07:47

It is not necessary to buy a racing car to have one’s advertising appear on one. So, as the above post says, you need to look at the reason for the purchase, and not let yourself be confused by the advertising aspect.

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By Jdopus
25th Jun 2018 10:00

It's a grey area and subject to challenge by HMRC so I'd advise doing some reading into previous cases around sponsored racing vehicles and horses. They can go either way entirely dependent on the facts of the case and the justification the client can provide for the payments.

If you've considered this - then if it's road legal and driven outside the tracks I believe it has to be treated as a motor asset purchase. To qualify for more favourable treatment the car has to be modified to an extent which makes it inappropriate for use as a road vehicle, although you could stand to check up on this, there's previous case law about where the line is drawn.

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By sosleepy
25th Jun 2018 13:09

There was a tribunal case won by the taxpayer (McQueen?) in which the sponsorship costs were deemed to be allowable. I don't recall there being any mention of the actual purchase of the vehicle(s), but I may be wrong so might be worth looking into the case.

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By Bruce Roberts
29th Jun 2018 10:19

What is the business purpose of the vehicle? I can't quite see how a racing car has any business purpose. The advertising might be allowable but I can't see how you could justify the cost of the car itself, even as an ordinary asset.

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By Michael C Feltham
29th Jun 2018 11:46

Set up a separate non-profit Ltd co to acquire the asset and to be run as a racing team, only.

Modify the car to make it non-street legal (if necessary under the regulations in which the car would compete, make such changes quickly restorable).

Your client should pay the racing team as an advertising expense.

Thanks (3)
By Optimum
29th Jun 2018 18:16

All, thanks so much for the varied but relevant replies. I suspect the directors will drive the car but they might have a professional in mind - I will have to check.

I summate a conservative approach would be to treat the car as non-allowable but the cost of adding and maintaining the sponsorship is allowable.

This makes me wonder what other costs might be allowable? Driver, fuel, tyres, track fees?

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Replying to Optimum:
By Michael C Feltham
29th Jun 2018 19:32

All costs are in theory deductible.

IF the car cannot be used on the roads, then by HMRC's quaint definition of "Car", it is not a "Car" per se, but capital equipment.

I would also suggest the sponsors if driving at any time, are paid a small sum as fees.

The only problem I can see, is HMRC treating the Ltd Co as a connected activity.

For the record, back in the dark ages, I was deeply involved in motor racing and apart from driving, ran a team of eight cars, under a racing team name which was separate from my retail automotive business. Somewhere, I still have my - very old - FIA International Entrant's Licence...

However UK taxation codes are poles apart from what was then.

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