Sponsorship - the recent Interfish case has helped clarify the position for those businesses seeking to get involved in motorsport sponsorship report Harris & Co chartered accountants Northampton, the specialist motorsport accountants.
In the case of Interfish Ltd  TC 02275, the First-tier Tribunal found that no part of sponsorship payments made by the taxpayer had been paid wholly and exclusively for the purposes of the taxpayer’s trade. The taxpayer had made payments totaling approximately £1.2m over three years to a local rugby club. In a provisional hearing (Interfish Ltd  TC 00520), Judge Nicholas Paines QC had requested that the taxpayer and HMRC identify and agree on the value of those parts of the payments which related to the direct promotion of the taxpayer’s trade (through logos on shirts, etc.). The taxpayer and HMRC had been unable to do this; the taxpayer having insisted that the value of those parts was the perceived value to the taxpayer and HMRC that the value was the amount that the taxpayer would have had to pay for the benefits received. At the later hearing, Judge Paines ruled that no deduction was due as he had not been provided with evidence that any part of the payments related to the direct promotion of the taxpayer’s trade:
‘In the present case....., there was no evidence that any part of the disputed payments had been charged by the Club in respect of the visible promotion, nor as to the terms, if any, upon which the Club made the visible promotion available or as to the precise periods within Interfish"s period of sponsoring the Club over which any of the visible promotion was given. All I know is that Interfish made certain payments – tailored to the Club"s financial needs as described in my previous decision – and that, over and above the influence and expectation of reciprocal benefits that Interfish gained within the local business community, it obtained.... visible promotion at no extra charge.
The evidence falls short of enabling me to find that any part of Interfish"s payments was for the purpose of obtaining any of the visible promotion. Mr Colam"s estimates in his witness statement of the value of its components are expressed in the present tense. His evidence falls short of saying (for example) that he placed a particular value on any element at the time of making any of the payments, expected Interfish to receive particular items of visible promotion at that time or feared that, unless payment was made, any visible promotion would be withdrawn. I cannot therefore find that any part of the payment was made wholly and exclusively for the purpose of obtaining the visible promotion.’
It is not clear from the judgment what values would have been put on the trade-related payments had any trade-related payments been proved; i.e. whether Judge Paines would have accepted the perceived value for the taxpayer (presumably at the time the payments were made rather than with hindsight) or the lower values put forward by HMRC. However, it is clear that a deduction of some value would have been possible had separate payments for the promotional items been made or had documentation been in place to demonstrate that part of the sponsorship payment related to promotional items.