In a recent case heard by the Upper Tribunal, Interfish Ltd were denied tax relief for sponsorship payments made to a local rugby club, Plymouth Albion.
The sponsorship payments were significant; over £1.2m over a number of years. The payments were used to fund the purchase of players as well as propping up the club’s finances.
During the hearing it became apparent that Mr Colam, the managing director of Interfish Ltd, was a staunch supporter of the club and had personally purchased shares that allowed him a measure of influence at board level.
In their judgements both the First Tier and Upper Tribunal panels held that the payments had been made with a duality of purpose and not, as the law demanded, wholly and exclusively for the purposes of the company’s trade.
Accordingly, the payments to the rugby club were disallowed for corporation tax purposes. Readers who may be contemplating large sponsorship payments should ensure that they take advice before signing the cheque!