Sponsorship is a popular way for businesses to promote their brand. But when sponsorship meets tax, things get a little more complex. One of the biggest questions businesses have is: Is there VAT on sponsorships?
The answer is when the sponsor is receiving something in return, this may have VAT implications.
In this article, you will get to know more about VAT on sponsorship in the UK, including:
- When Is VAT Charged On Sponsorship,
- When Is Sponsorship Outside The Scope Of VAT,
- Can You Claim VAT Back On Sponsorship &
- Much More…!
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What Is Sponsorship in Business?
Sponsorship is when a business provides money, goods, or services to another party in exchange for some form of benefit.
For VAT purposes, sponsorship is treated as a taxable supply of services.
That means when a company sponsors an event or activity, and in return receives advertising or promotional benefits such as logos, banners, shoutouts or branding rights, this is considered a business service subject to VAT.
If the sponsorship is given without expecting anything in return and is purely a donation, it falls outside the scope of VAT.
When Is VAT Charged on Sponsorship?
VAT is charged when a sponsor receives something of value in return. For example:
- A business pays £10,000 to sponsor a football club, and their logo appears on players kits → VAT must be charged.
- A company sponsors a charity event in exchange for advertising space, banners, or media exposure → VAT must be charged.
- An organisation receives sponsorship with the agreement to promote the sponsor’s products → VAT applies.
In all these cases, the sponsorship is not a “gift” but a business transaction. In short, If the sponsor gets publicity or promotion in return, VAT is usually due.
When Is Sponsorship Outside the Scope of VAT?
Not all sponsorship attracts VAT. If a payment is made without any direct benefit to the sponsor, it can be treated as a donation.
For example:
- A business gives money to a charity and receives only a small token acknowledgment (like a name in a programme) → usually no VAT.
- A donation where the sponsor receives no advertising rights or promotional value → outside the scope of VAT.
HMRC looks at what the sponsor gets in return, if it’s just recognition (like “thank you for your support”), it may not trigger VAT.
Disclaimer: The information about “Topic Name” is provided in this article including text and graphics. It does not intend to disregard any of the professional advice.
Donations And Input Tax:
If we take the example of a business that offers equipment to a local sports club. If the equipment is given purely as a donation (with no benefit in return), it is outside the scope of VAT and you cannot reclaim input VAT. However, if the equipment is provided as part of a sponsorship arrangement that promotes your business name, it counts as sponsorship and input VAT can be reclaimed.
Ins and Outs – VAT:
The more value benefits a business receives like advertising on the billboards. If the promotion of your business is happening through the events at the club. This will be considered as the supply of products or goods. VAT on sponsorship will be claimed for the money spent on providing products for such events.
Moreover, such events at clubs make VATable supply to the offered services or products by your business. They can’t charge VAT until they are VAT registered. In case you offer your products or services to a charity, you can account for their value for smooth processing.
Here, we can take a practical scenario in which a company pays 3000 pounds as a charity (this includes 500 pounds VAT). This charity is considered to be local and it is not VAT registered. There is no return for the goods or services as well. The plan is to reclaim the VAT which is 500 pounds for the gifted products as charity. As these were charged on the purchased goods.
Such arrangements are VAT neutral and this must be informed to HMRC very clearly.
Who Charges VAT on Sponsorship?
Event organisers, clubs, or charities providing advertising or promotional services must charge VAT (if VAT-registered). Charities are not exempt from VAT if they are providing promotional benefits to sponsors. If the sponsorship is purely a donation, charities and clubs do not charge VAT.
Common Scenarios and VAT Treatment
| Scenario | VAT Position | Notes |
| Sponsorship with Logo on Kit | Standard Rated (20%) | Considered advertising |
| Donations with small acknowledgement | Outside VAT | Only if benefit is minimal |
| Charity sponsorship with banners & mentions | Standard Rated (20%) | Clear advertising benefit |
| Business sponsoring an event for brand promotion | Standard Rated (20%) | Input VAT can be reclaimed if business related |
| Directors sponsors local club with company (personal interest) | VAT not recoverable | Not a genuine business expense |
VAT Invoicing for Sponsorship
If you are VAT registered & provide sponsorship benefits, you must issue a VAT invoice to the sponsor. Likewise, if a sponsor provides goods or services as sponsorship and is VA -registered, they must issue a VAT invoice.
Are There Any VAT Exemptions for Sponsorship?
The short answer is: No, sponsorship itself is not VAT exempt. When a business sponsors an event, team or individual and receives something in return, HMRC sees this as a supply of services. That means the sponsorship is subject to VAT at the standard rate (20%).
If a business simply donates money or goods with no advertising, no promotional benefit, this is not sponsorship. In that case, the payment is treated as a donation, which is outside the scope of VAT.
But because it’s outside the scope, the business cannot reclaim input VAT on the costs.
Can You Claim Vat Back On Sponsorship?
Yes, if you are VA rregistered and the sponsorship is used for business purposes such as brand promotion, you can usually reclaim the VAT charged by the sponsored organisation.
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Conclusion:
To sum up the discussion, we can say that VAT rules do allow to reclaim of VAT on sponsorship and donations. It is to be ensured that while trying to reach the goal, you must not forget to follow the professional way to follow. We hope this blog helped to develop a better understanding of VAT on sponsorship and donations.
Disclaimer: The information about VAT on sponsorship is provided in this article including text and graphics. It does not intend to disregard any of the professional advice.