|HMRC Reference:Notice 701/41 (March 2002)||View Change History|
This notice cancels and replaces Notice 701/41 (July 1995). Details of any changes to the previous version can be found in paragraph 1.1 of this notice.
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This notice explains how VAT applies if you give or receive sponsorship. It has been restructured and rewritten to improve readability, but the technical content has not changed from the July 1995 edition.
A person who receives sponsorship will normally be making a supply to the sponsor. This means that even if the other taxable supplies you make would otherwise be below the VAT registration limits, you may become liable to register because of your sponsorship income. If you are not already registered for VAT you should read Notice 700/1 Should I be registered for VAT? You may also be making taxable supplies if you are a sponsor providing sponsorship in the form of goods or services rather than by payment of a sum of money.
This notice and others mentioned are available both on paper and on our Internet site at www.hmce.gov.uk.
Sponsorship is a common feature of artistic, sporting, educational and charitable activities. However, it is not restricted to these areas and it can involve payment in the form of goods and services as well as money. The payments may also be described as something else, for example as a donation.
Where you receive sponsorship or some other form of support you will normally be making taxable supplies if, in return, you are obliged to provide the sponsor with a significant benefit. Typically this might include any of the following:
This list is not exhaustive and there are many other situations in which your sponsor may be receiving tangible benefits. What matters is that the agreement or understanding you have with your sponsor requires you to do something in return.
You may receive financial or other support in the form of donations or gifts. Provided they are freely given and secure nothing in return for the donor they are outside the scope of VAT. A taxable supply is not created where you provide an insignificant benefit such as a minor acknowledgement of the source of the support. Examples of this can include any of the following:
Provided it is entirely separate from your sponsorship agreement, you are not required to account for VAT on any donation or gift (of the kind described in paragraph 2.2) you might also receive from a sponsor. However, it must be clear that any benefits your sponsor receives are not conditional on the making of the donation or gift.
You may be making taxable supplies if you provide sponsorship in the form of goods and/or services rather than in money.
If you provide …
Goods and/or services to somebody who, in return, is making a taxable supply to you (see paragraph 2.1).
You are making a taxable supply of those goods and/or services.
Goods to somebody as a gift or donation (see paragraph 2.2).
You may be liable to account for VAT under the business gift rules. For further information on business gifts see Notice 700/7 Business Promotion Schemes.
Services to somebody as a gift or donation (see paragraph 2.2).
No VAT is due.
If you make taxable supplies in return for sponsorship you must account for VAT on a value that covers everything you receive under the sponsorship agreement. There is further guidance on valuation in Notice 700 The VAT Guide. If you agree the amount of sponsorship without allowing for VAT you must treat the amount received as VAT inclusive.
You may exclude from the value any additional payment from your sponsor that may be treated as a non-taxable donation (see paragraph 2.3).
You should consider the guidance on valuation in Notice 700 The VAT Guide where you supply goods and/or services in return for non-monetary consideration in the form of the benefits referred to in paragraph 2.1.
If you are a charity making supplies to sponsors as part of a fund raising event your supplies may be exempt. For further information about this please see Leaflet CWL4 Fund raising events: Exemptions for Charities and other fund raising bodies. There is also guidance about donations of goods to charities in Notice 701/1 Charities.
If you make supplies of advertising services and publicity to overseas sponsors, your services may be outside the scope of UK VAT. You can find more about this in Notice 741 Place of supply of services.
You must issue a sponsor with a VAT invoice for your supplies if the sponsor is registered for VAT. A sponsor who provides sponsorship in the form of taxable supplies of goods and/or services is also required to issue a VAT invoice.
If you receive goods and/or services to be given away as prizes and …
Then you are …
Are obliged to promote or provide advertising for the donor.
Making a taxable supply of services to the donor for non-monetary consideration. You will find guidance on valuing this supply in Notice 700 The VAT Guide
Apart from any general understanding that the donor might benefit from the publicity, you are not obliged actively to promote or advertise the donor.
Not making a taxable supply.
Generally you should follow the guidance in paragraph 2.4 to decide whether you are making taxable supplies. However, if you donate a holiday, the special rules of the Tour Operators Margin Scheme may apply. Further guidance on the scheme is in Notice 709/5 Tour Operators Margin Scheme.
If you do not receive a supply in return for the prizes you give, you may be unable to recover tax on the prize if it falls within the business entertainment provisions. You can find further guidance on these provisions in Notice 700/65 Business Entertainment.
Specific guidance on the tax value of goods you provide as prizes in return for advertising or promotion services is given in Notice 700/7 Business Promotion Schemes.
If you receive prizes for your competition in the form of goods and/or services ……
In return for supplies of advertising or publicity you are making to the donor (see paragraph 4.1).
In general you can claim input tax on the prizes, subject to the normal rules. However, if the prize is a holiday or day trip you will not be able to claim any input tax. Also some other prizes may be regarded as business entertainment on which you will not be able to claim any input tax. You can find further guidance on business entertainment in Notice 700/65 Business Entertainment
And you are not obliged to provide anything to the donor in return (see paragraph 4.1).
There will be no input tax to claim.
We would be pleased to receive any comments or suggestions you may have about this notice. Please write to:
HM Customs and Excise
Supply of Services Team
4E, New King’s Beam House
22 Upper Ground
If you have a complaint please try to resolve it on the spot with our officer. If you are unable to do so, or have a suggestion about how we can improve our service, you should contact one of our Regional Complaints Units. You will find the telephone number under ‘Customs and Excise - complaints and suggestions’ in your local telephone book. Ask for a copy of our code of practice ‘Complaints and putting things right’ (Notice 1000). You will find further information on our website at http://www.hmce.gov.uk.
If we are unable to resolve your complaint to your satisfaction you can ask the Adjudicator to look into it. The Adjudicator, whose services are free, is a fair and unbiased referee whose recommendations are independent of Customs and Excise.
You can contact the Adjudicator at:
The Adjudicator's Office
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