Introduction »

HMRC not a good sport!

A recent tax case considered whether a number of substantial payments made by a company, described as 'sponsorship' payments, to Plymouth Albion Rugby Football Club were deductible in computing the company's profits.

The company which made the payments is in the fisheries industry and, coincidentally, the controlling owner of the company was interested in rugby and a good player himself. His contact with the rugby club increased over the years.

The company’s brand appeared on a perimeter hoarding, on players' shirts and on each page of the club's website. The company also used the club for business hospitality. In addition, the company lent money to the club and made substantial payments to cover what would otherwise be a deficit in the club's player budget.

The Tribunal held that the payments overall were not sponsorship but to improve the financial position of the rugby club and so were not an allowable deduction for the business.

The case can be contrasted with another, where the proprietor of a haulage business included the costs of a rally car and associated races in his accounts. In that case, the rally driving (undertaken by the proprietor himself!) was in a car painted in the business livery and the car was left outside the business premises. It was held that these costs were incurred wholly and exclusively for the purposes of carrying on the business and that the enjoyment of the proprietor was an incidental effect.

Where a business decides to sponsor a sports team, it doesn’t always follow that the sponsorship is an allowable cost. Mixing business and pleasure can be an expensive occupation, particularly if there is no tax relief available, so seeking professional advice is recommended.

Introduction »