Sales, advertising and marketing

By Tolley

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Sales, advertising and marketing
  • Launch costs
  • Signs
  • Sponsorship
  • Business entertainment and gifts

Expenditure on sales, advertising and marketing activities may include amounts which are disallowable in the business’ computation of trading profit. This may be because the expenditure is:

  • capital in nature (CTA 2009, s 53; ITTOIA 2005, s 33)
  • not incurred wholly and exclusively for the purpose of the trade, or (CTA 2009, s 54; ITTOIA 2005, s 34)
  • business entertaining (CTA 2009, s 1298; ITTOIA 2005, s 45)

Expense accounts called sales, advertising, marketing, PR, etc should always be checked for disallowable items. Depending on the amounts involved, it may be appropriate to include a breakdown of expenditure with clear descriptions on the tax computation. This is particularly advisable if amounts fluctuate significantly from prior years, or if there is some other unusual event in the year which may prompt HMRC to open a compliance check.

This guidance deals with the tax treatment of certain types of sales, marketing, advertising and other similar expenditure where there is HMRC guidance and / or relevant case law.

Where expenditure is capital in nature, it may be an allowable expense under the simplified cash basis provided that it would be eligible for plant and machinery allowances. See the Simplified cash basis expenditure guidance note. This will mainly mean that expenditure on physical items such assigns and advertising hoardings are treated asrevenue deductions under the simplified cash basis.

Launch costs

Businesses may incur costs in respect of the initial launch or establishment of a new product or brand. The costs may be from a mixture of sources, ie the acquisition of a title in publishing, plus additional costs to develop and re-launch the brand. Alternatively, the costs of a brand new product may be built up entirely from scratch. These costs

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