VAT treatment of payments under sponsorship agreement between sports club and charity
Background: HMRC had asserted that the sports club should account for VAT on payments received under a sponsorship agreement with a local charity, and raised an assessment for nearly £100,000. They stated that the fact that the charity’s logo appeared on the player’s jerseys did not mean that the club was providing advertising to the charity (which would be a zero-rated supply). They maintained that, for a supply to amount to 'advertising', something specific had to be advertised and the mere display of a logo was insufficient.
How we helped: Working in conjunction with Tax Counsel, we firstly persuaded HMRC to drop their opposition to the club’s hardship application, meaning that the club’s appeal against the assessment could be heard by the Tribunal without prior payment of the VAT demanded. We then put forward a detailed and forceful argument as to why the club’s supply did amount to 'advertising', pointing out to HMRC that their stance contradicted guidance in their own manuals! Ultimately HMRC accepted the argument prior to the appeal being formally heard, and withdrew the assessment (and the threat of associated penalties). We are currently discussing the possibility of compensation for our client’s costs incurred.