Hi!
I have a client who has/about to purchase "executive hospitality" season tickets (10 year license agreement) for a premier league football club.
The annual fee could be classed as business entertainment in the P&L, no vat claimed, and no CT deduction.
However, a colleague had mentioned putting as an asset on the balance sheet (again no vat claimed and no capital allowances).
What is your opinion here?
And if an asset, how would you cost/depreciate if annual cost is say £2,000.
Replies (18)
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Err, why would it not be an asset? Assuming that the team in question did not suffer a significant decline it its fortunes and end up in a lower league, I would have thought an equal allocation of the cost to each year would be a reasonable way to amortise.
PS I assume that the annual cost is more than £2,000 - a lot more
Because whilst it is possibly assumed that all payments for x years are made at outset there may be differing payments within such agreements-having not read the agreement I thought a qualification was prudent.
My point was that if it is a full payment in advance, covering all the cost for x years, it is a prepayment.
Thanks for the responses.
Yes it is more like £5k per season per seat.
So you would capitalise at one seasons cost? then amortise by the full amount?
Leave £1?Or would you put the 10 years of £5k, so £50k as an asset and amortise £5k each year? (even though the payments each year are the £5k)
Surely your answer to that will be found on the contract between your client and the football club.
It's hardly likely to be a matter of choice!
eh?
Is there an initial payment as well as the annual ones. If its just an annual payment ("even though the payments each year are the £5k"), this looks more like a lease than an asset, so why would you capitalise it?
So what is there to capitalise? If the football season is not co-terminous with the accounting period, you might treat some of the annual payment as a prepayment (so a current asset).
Otherwise are you suggesting that simply the right to pay £5k/year is worth something?
Is there a get out clause? Otherwise you would have one side as a liability (i.e. you must make that payment every year for five years) and the other an asset. Each year you offset the ticket payments against the liability and use depreciation to reduce the asset.
No initial payment.
To clarify it is a LICENSE AGREEMENT, for ten years with an annual payment of £5k.
It's a £5k a year revenue payment, presumably for business entertaining.
If the club in question is Manchester United then HMRC may well demand an independent psychologists report regarding the sanity of anyone wanting to watch them for the next 10 years.
Is there a get out clause? Can you sell it on to another party (as in the right tot he season tickets - not individual matches).
I doubt it will be something you could capitalise. As others have said, you might end up with a prepayment - and might well end up with an operating lease commitment, but read the conditions and it should be fairly obvious.
Mine is definitely not an asset - despite the relevant club currently occupying joint top spot with two others in the prem.
Tom 7000 wrote:
dont forget to put it on your P11d....
really? questionable don't you think
Certainly questionable if for say Sunderland, absolutely no BIK delivered ,in fact should get a tax credit for going to watch.
On the plus side next year they will be cheaper and supporters will get to visit some interesting and exotic places.