You may want your business to sponsor a sports team, club or an event as a great way to promote your business. It also gives you an opportunity to reach your target customers, enhance your reputation and public image.
Sponsorship payments are different from donations as you usually expect something back in return. So to qualify for tax relief, you need to be able to show how your business has benefited from the sponsorship. Usually, this will be part of your wider marketing strategy and you will be looking for publicity from the event, such as including your logo on any printed materials.
If you want to sponsor someone you have personal involvement with (say your child plays in the sports team), then it is more difficult to prove it’s a commercial business decision and a deductible expense.
HMRC will look at:
- whether you paid over the odds for the sponsorship
- is it excessive compared to other advertising spend of the business?
- whether the commercial benefit received by the business can be proven, such as increased social media hits or improved sales as a result.