Sponsorship

[Crook]

Can I ask how people manage their sponsorship please?

It's looking likely that I've managed to convince a company into a small amount of funding which is a massive help and also gets other people involved with the race experience which is great.

My question is
If they give me the money it has to be declared income and I'll get taxed on it so if I start a company that is VAT registered then A. I get the benefit of VAT and B. it's not taxed. The company won't make a profit so no corporation tax there and all I have to do is submit annual accounts which should be pretty straightforward or am I missing something?

Many thanks for any help.

[loggyboy]

https://www.accountancydaily.co/qa-vat-implication...

I read this as if its your hobby, and your not making a proffit from the sponsorship then no income tax is due.

Income tax is charged on the profits of a trade, profession, or vocation.

The only VAT implications are the sponsor so not relevant to the receiver.

[Crook]

Thanks, I can't see where it says that though. Surely any money given to me irrespective of origin (except for ISAS etc.) would need to be declared as income regardless of what it would be spent on.

The VAT part was if the company buys something for racing and it get's charged VAT then that get's passed on in effect to the sponsor buying marketing on the car for £X plus VAT. I'm quite ignorant of this sort of thing but then "I" get 20% extra in sponsorship.

Or does it not work like that?
Or as a director of the company would it then be BIC?

Gawd knows.

[carl_w]

Crook said:

The VAT part was if the company buys something for racing and it get's charged VAT then that get's passed on in effect to the sponsor buying marketing on the car for £X plus VAT. I'm quite ignorant of this sort of thing but then "I" get 20% extra in sponsorship.

No. Any VAT your company charges the sponsor, unsurprisingly HMRC will want that paying to them. You could reclaim VAT on stuff your company purchases though, and offset that against the VAT you're paying to HMRC.

Assuming the sponsor is VAT registered they won't care if you're charging them VAT or not. You'll either bill them, say, £1000 without VAT which will cost them £1000, or £1200 inc VAT which means they'll pay you £1200 and reclaim £200 from HMRC.

[Graham]

The risk is HMRC see the company as setup to fund your racing, and you'll get a nice tax bill for benefit in kind. once you add up the cost of setting up the company, accounting etc. unless your putting a lot through the company probably not worth it..


better of as a hobby and take sponsorship. easiest way around the vat is to get sponsor to buy stuff. I have one who buy me a couple of sets of tyres a year.

we agree a sponsorship figure ex vat as they reclaim the vat.

Edited by Graham on Thursday 20th January 17:50

[Crook]

carl_w said:

You could reclaim VAT on stuff your company purchases though, and offset that against the VAT you're paying to HMRC.

This was what I was thinking.

[Crook]

Graham said:

The risk is HMRC see the company as setup to fund your racing,

This was also what I was thinking. I know if I sponsored myself it would be BIC but I somehow twisted logic to think if it was a 'Racing Team' company then that would somehow swerve BIC if the focus of the business was racing but I see that being a Director then puts it back to BIC.

Graham said:

better of as a hobby and take sponsorship. easiest way around the vat is to get sponsor to buy stuff. I have one who buy me a couple of sets of tyres a year.

we agree a sponsorship figure ex vat as they reclaim the vat.

Two questions: do you have to declare the value of the sponsorship as a hobby for taxable income? I know I asked that originally but I wasn't sure of the answer.

Second is, how does that work with their accounts - presumably they put it through as a marketing expense?

Thanks to everyone who's taken the time to answer - much appreciated.