Equestrian Sponsorship is it worth it?13th October 2016 | Posted in: Business Tax, Company News
Is it worth it – Should your business sponsor in the equestrian industry?
The cost of competing at equestrian events all year is expensive and as amateur riders we rely on the income from either our day job or business to fund this.
Growing up, our show jumping hobby was funded by my dad through his construction business in the Scottish Borders. I now support the upkeep of my horses and the cost of competing at events via income from my accountancy business.
But the question here is can a business claim a tax deduction against their profits on the cost of these activities?
This is a grey area and persuading HMRC that the ‘sponsorship’ is an expense ‘wholly and exclusively’ for the purpose of the trade is not easy in these circumstances.
There have been a few tax cases on this area and one directly linked to equestrian, Executive Network (Consultants) Ltd v O’Connor (1996)(SpC56). The company made sponsorship payments to the equestrian business of the major shareholder’s wife for advertising and promotion at equestrian events. The Special Commissioners held that these payments were not allowable for tax purposes because they were seen to be supporting the business of the wife.
However there was a different outcome in the case of McQueen v HMRC (2007)(SpC601). In this particular case Mr McQueen ran a coach business and was also a motor-rally competitor. The cars were painted in the coach colours and there was a substantial increase in turnover in the three-year period when the sponsorship was paid, although this could not be seen to be directly attributable to the sponsorship. Nevertheless Mr McQueen’s appeal was upheld by the Special Commissioners and a tax deduction was allowed.
To satisfy HMRC that sponsorship qualifies for tax relief it cannot be seen to have a dual business and personal purpose. In other words the sponsorship must only be for business purposes to qualify as a tax allowable deduction.
It is always best to get specialist advice on these matters and therefore if you have any accounting or tax queries relating to your equestrian business please get in touch with me, Lea Brash, Director and Equestrian business owner, on 0131 317 7377.