Lots of big companies sponsor sporting and cultural events, but you may be wondering whether your company can do so and what the rules are.  Providing you can demonstrate that you have considered the following points there is no reason why all the expense cannot be allowable for tax

Demonstrate the sponsorship is wholly and exclusively for the purposes of the trade

• Show how it will benefit the company
• Ensure there is no private benefit

The purpose of sponsorship should be backed up by evidence

• Where did you hear about the opportunity from? An independent source is better.
• Why did you choose this option?
• Keep copies of correspondence showing the decision process
• Demonstrate how sponsorship will put the company in front of the intended audience
• Show how sponsorship can be exploited in local media
• Make sure sponsorship is mentioned on your website
• Even better if there are backlinks from the sponsored person/event website
• Make the most of these opportunities by branded clothing and banners

Show that it is a commercial decision

• Cannot be relative or close friend
• That you are not necessarily paying full amount sought, there may be a variety of small and big givers
• Geographical closeness – for a Kent based business, sponsoship in Scotland is unlikely to be beneficial
• Have you considered other options?
• If you are sponsoring a novice sportsman rather than an established one, you may want to associae your company with a rising star

It may not be allowable if

• Any capital element – eg purchase of a car, although other allowances may be available
• Any element of entertaining (in the usual way for business expenses)

In summary, provided you can demonstrate it is armslength and can extract some advertising from the local media and on your website (“proud to be supporting”) then this should be wholly allowable.  From a commercial perspective you may also set requirements for number of events attended, or duration of an event in order for you to continue the support.

The full details are in: http://www.hmrc.gov.uk/manuals/bimmanual/BIM42565.htm

The advice above is based on our understanding of HMRC guidelines and may not apply to your circumstances, so seek professional advice before taking any steps based on the information shown. If you would like advice in this or other areas feel free to call.  Alastair Wood, AW Accounting, Gravesend – Accountants who “speak your language”