The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
This guidance note provides an overview of the VAT treatment of sponsorship income.
A sponsor normally provides products and / or services free of charge or financially supports an event, activity, person or organisation. A sponsor can be an individual or group that provides the support. Sponsorship is usually described as a cash and / or in-kind fee paid to an organisation, typically in sports, arts, entertainment or charity sectors that is made in return for access to the exploitable commercial potential associated with that event / cause.
A person who receives sponsorship is normally regarded as making a supply to the sponsor and more information on the possible VAT consequences can be found below.
Payments are often described as a donation and sponsorship is similar to a donation in that the person giving the money is motivated by a need to support a cause, etc. However, a donation is freely given with no expectation of receiving anything in return, whereas, with sponsorship, the sponsor is expecting to receive a benefit of some description in return and this may be a supply for VAT purposes and the VAT issues need to be considered.
This section provides an overview of the VAT treatment of the goods / services provided by both the recipient of the services and the person providing the sponsorship.
If the recipient of the sponsorship is obliged to provide the sponsor with a significant benefit, then the sponsorship could be viewed as payment for a supply of services by the recipient. The recipient will be required to account for VAT on the services provided to the sponsor in the normal way.
A significant benefit can include the following:
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