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