Sponsorship is a way for businesses to obtain benefit by bringing its name, products or services to the public’s attention. It is often in the form of advertising, whereby the business tries to obtain a benefit by association with a popular, successful or up and coming star.

Look out for the stars of the future and become involved in their early days. As they grow, hopefully, your business will grow.

Is sponsorship allowable for tax?

There is no reason why the expense should not be allowed but it is critical that you can demonstrate that the following points have been considered.

The sponsorship is wholly and exclusively for the purposes of the trade. For example:

• Why did you choose this particular sponsorship?
• Can you demonstrate a tangible link between your business and products and the sponsorship?
• Demonstrate clearly that there is no private benefit arising from the sponsorship.

Keep good records of all activities associated with the Sponsorship. These should include:

• How you became aware of the sponsorship opportunity. Keep any material and communications received that is related to a request for sponsorship
• What other opportunities were available and what made you make the final decision?
• Minutes of meetings and all correspondence
• Diary of meetings and full details of all related contacts
• Look at preparing a cost benefit analysis to show that there is a measurable return on the investment made. Measure the effectiveness
• Develop a marketing strategy to promote your business on the back of the sponsorship through local media and activities associated with the sponsorship (if you’re not already a member, talk to thebestof who can definitely help with this)
• Promote the Sponsorship on your website with a link to the sponsored site

Show that it is a commercial decision, for example:

• Cannot be for a relative or close friend
• Calculate expected return on the investment and pay accordingly. Do not just pay what is asked for.
• Take into account the geography of your business in relation to where the sponsorship will be seen. You have to be able to support the increased business you hope will be generated.
• Consider more than one opportunity
• Do not commit to any expenditure without taking advice from your Accountant. Some aspects of sponsorship will not qualify as an allowable expense, for example the supply of a car.

This summary is based on our understanding of HMRC guidelines and may not apply to your individual circumstances. Each sponsorship deal must stand scrutiny by HMRC who have the final say in what is acceptable.

Contact us on 01773 747990 for specific advice relating to your personal situation.

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