Sponsorship Costs

Sponsorship is a way to advertise your business services by aligning them to an event, production, personality or club. Many sports clubs and venues offer sponsorship packages for events whereby you obtain advertising, hospitality, tickets and other benefits for being a sponsor. Sponsorship costs can be claimed as a tax-free expense only if they are exclusively for business purpose. If there is an element of non-business purpose no allowance is due. HMRC tend to disallow sponsorship costs as business expenses.

If your limited company is considering sponsoring an event you may still be able to claim expenses. When considering whether sponsorship costs are allowable you should establish that the sponsorship is for the purpose of running your business.

Typically there may be a non-business purpose if the sponsored person is a relative, close personal friend, or you have a personal involvement in the sponsored activity.

HMRC will also consider the commercial benefit to your business when determining whether the costs are a disallowable expense such as:

  • Paying as much as the sponsored party wants without negotiation or consideration.
  • Not appearing to have regard to the commercial benefit to the company of the sponsorship, e.g. sponsoring an event in Plymouth when your customers and activities are based in Glasgow.
  • Not considering other options.
  • Not reviewing the effect on your business trade.

The sponsorship costs will be disallowed if the sponsorship is classed as capital expenditure (e.g. the sponsor buys a racehorse or car), or if it is expenditure that is specifically disallowed such as Entertaining Expenses.

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