Is sponsorship subject to VAT?

Arts organisations often seek business sponsorship, for example, to sponsor a specific theatre production or gallery exhibition; to sponsor a new building or wing; and to obtain general sponsorship of an organisation as a whole. Sponsorship payments usually have VAT implications.

The key question is – what does the sponsor get in return for their sponsorship payment? If there are no substantial benefits for the sponsor, the sponsorship payment is outside the scope of VAT. Naming a building or theatre seat is considered insignificant and can be ignored for VAT purposes if named after an individual not a business name. Substantial benefits such as advertising the donor/their business, participating in promotion, allowing the sponsor to use a name or logo, giving reduced price/free tickets, allowing access to special events or providing entertainment or hospitality facilities would be likely to be within the scope of VAT. Again, the value of the benefit could be split out, so a charge is made for the value of the benefits with the rest a donation. But receipt of the benefits must not be dependent on the donation being paid.

Want to discuss further?

Helen Elliott

Partner

Ross Palmer

Senior Tax Manager

Gillian McKay

Senior Tax Manager

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