To be updated step by step please go at: www.hmrc.gov.uk/businesses/giving/sponsorship.htm#1
Types of sponsorship payment
Sponsorship payments that your company makes to a charity in return for something are treated differently for tax purposes to any donations it might make to charity.
Sponsorship payments
Your company might do a deal with a charity to sponsor it, either by funding a particular event or project, or by sponsoring the charity's general work. The sponsorship deal might involve a one-off payment or a regular amount.
If your company gets something in return for its sponsorship payment then it’s likely to be regarded as a business expense. This could be high-profile advertising and publicity, for example, or perhaps access to the charity's mailing list.
Your company may be able to deduct the sponsorship payments when it works out its profits for tax purposes. But the charity could have to pay tax on the money if it can't use one of the special tax exemptions available to charities. This is because it would be trading income for the charity, not a donation.
Donations
If your business gets nothing in return for the money it gives to charity then it’s a straightforward donation. A simple public acknowledgement of your donation by the charity, perhaps in their newsletter for example, wouldn't normally change this. And there's no reason why you can't generate some positive publicity for your business yourself by highlighting its links to charity.
Companies - but not sole traders or partnerships - that give money to charity can deduct the value from their Corporation Tax profits. The charity won't pay any tax on the donation either, provided they use the money for charitable purposes. See the section below ‘Claiming tax relief for donations to charity’.
What is VAT in the UK?
Value Added Tax (VAT) is a tax that's charged on most goods and services that VAT-registered businesses provide in the UK. It's also charged on goods and some services that are imported from countries outside the European Union (EU), and brought into the UK from other EU countries.
VAT is charged when a VAT-registered business sells to either another business or to a non-business customer.
When VAT-registered businesses buy goods or services they can generally reclaim the VAT they've paid.
There are three rates of VAT, depending on the goods or services the business provides. The rates are:
- standard - 17.5 per cent
- reduced - 5 per cent
- zero - 0 per cent
There are also some goods and services that are:
- exempt from VAT
- outside the UK VAT system altogether
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