Interfish loses sponsorship tax rematch

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A recent tax tribunal ruling may make sports sponsorship less financially attractive and harder to arrange, writes Nick Huber.

Sponsorship is usually categorised as advertising and promotion in company accounts. In addition, as long as the sponsorship payments do not also benefit the managing director’s personal hobby, or those of his family, it has been assumed that they should qualify for a deduction for tax.

But a supplementary hearing in the long running Interfish v HMRC [2012] UKFTT 599 (TC02275) sports sponsorship tax case reinforced the sensitivity in this area of the wholly and exclusively test.

Interfish is a successful seafood supplier based in Plymouth that donated over £1m to its local rugby club Plymouth Albion. 

The company gave cash to the club at different times, with the money being used to prop up the club financially and later to buy better players.

In her 17 October AccountingWEB podcast, tax barrister Anna Fairpo contrasted the Interfish verdict with the McClaren case, where the Forumla 1 racing outfit won its appeal against HMRC's runing that its "spygate" penalty was a business expense.

The cases illustrated the importantce of identifying elements of any sponsorship or sports expenditure that is or isn't wholly and exclusively for the purposes of trade, Fairpo explained. 


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About Nick Huber

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I’m a specialist business journalist and have a particular interest in tax and technology. 


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22nd Oct 2012 12:32

Duality of purpose

I'm not sure I agree that it's a shocker.

It's all about duality of purpose, and the crux of the argument is the ability to identify a purpose other than the business benefit of the claimant (as Anna Fairpo says).  It was accepted as a fact that 'Interfish managing director Johannus Colam had shares in the club and was able to assert influence at board level' which makes that argument into a slam-dunk.  It could not (without great difficulty) be asserted that the management of Interfish had no interest in the fortunes of Plymouth Argyle, and hence the arguments about using the relationship to obtain business contacts were effctively trumped.

If by contrast the directors of Interfish had demonstrably been fans of say ballet, or opera or even rugby, the outcome may have been different.  But if that had been the case they might well have chosen someone other than Plymouth Argyle to benefit from their largesse.  And that of course is the whole point.

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22nd Oct 2012 12:43

surely this is the case with any sponsorship

"One of the taxpayer's purposes was to improve the club's financial position, not solely for the purpose of the trade of the taxpayer"


incidentally how do we get a rectangle around the quotes its beyond me

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By hiu612
22nd Oct 2012 14:05

Andrew has a point

The headline of the story might seem surprising but once you have common directors and shareholders then you're on to shaky ground.

I'm not sure how much worry this will cause those making genuine 3rd party sponsorship payments.

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