Are sponsorship costs allowable?

Question

My client is a company which is considering making sponsorship payments to a local cricket club. What steps can my client take to maximise the corporation tax deduction for these payments?

Answer

The question of deductibility of sponsorship expenditure is dealt with in the HMRC’s Business Income Manual at BIM42555–BIM42565.

Sponsorship costs are allowable in arriving at the profits of a trade except where they are:

• capital expenditure;
• expenditure not made wholly and exclusively for business purposes; or
• expenditure which is specifically disallowed (such as any entertaining expenditure).

Key tax provisions

The general rule for the deductibility of sponsorship payments is contained in CTA 2009 s 54 which states:

‘(1) In calculating the profits of a trade ...