Should Your Creative Business Sponsor a Local Kids’ Sports Team? The Tax Angle Explained

Creative business owners often love giving back to their communities. One common way to do this is by sponsoring a local kids’ sports team – it’s a feel-good move and can boost your visibility in the community. But how does HMRC view these payments? Are they a marketing cost you can deduct, or simply a donation?

Sponsorship vs. Donation – Why the Difference Matters

Sponsorship is where your business receives something in return – usually advertising, publicity or promotion (logo on shirts, banners at the ground, mentions on social media). If the arrangement is genuinely to promote your business, HMRC will normally treat the cost as an allowable business expense, deductible from profits for Corporation Tax (or Income Tax for sole traders).

Donations are gifts with no expectation of anything in return. Payments that are purely philanthropic – for example, handing over money to support the team but not asking for your business name on shirts or banners – are generally not allowable as a business expense.

What HMRC Looks For

HMRC will consider:

• Is there a clear commercial benefit to your business (advertising, PR, new leads)?

• Is the cost reasonable in relation to your business size and turnover? (A small design studio paying £10,000 to sponsor a junior football team might raise eyebrows.)

• Is the sponsorship part of your normal marketing strategy?

If the answer to these is “yes,” the payment is more likely to be accepted as a deductible marketing expense.

VAT Considerations

If you’re VAT-registered and the team/club is also VAT-registered and invoices you for the sponsorship with VAT, you can usually reclaim the VAT as input tax (provided the sponsorship is for business purposes).

If the club is not VAT-registered (many aren’t), there won’t be VAT to reclaim.

Pro tip: If your sponsorship is to cover the cost of kit or equipment for a sports team, why not pay the supplier for that kit directly? That way you can potentially reclaim VAT on all the costs even if the sports team themselves are not VAT registered. 

Employees or Directors’ Children Playing?

If your sponsorship directly benefits your employees’ or directors’ children (e.g. you’re paying for their kit or fees), HMRC could see it as a staff perk rather than marketing. That could trigger a benefit-in-kind charge for the employee/director. Keep the arrangement clearly at arm’s length and in the business’s name to reduce risk.

Example

Your creative agency pays £1,500 to sponsor the local under-12s football team. In return, your logo appears on their shirts and match-day banners, and you’re featured on the club’s social media. This is a clear marketing arrangement, so the £1,500 should be deductible for Corporation Tax and, if VAT is charged, you can reclaim it.

Compare that with giving £1,500 to the club as an unconditional gift – no logo, no mention, no banners. That’s a donation, so not deductible.

Key Takeaways

• Make sure there’s a written agreement with the club outlining the promotional benefits.

• Ensure the cost is proportionate and commercially justifiable.

• Keep invoices and evidence of the publicity you receive (photos, social posts).

Handled correctly, sponsoring a local kids’ sports team can both do good in your community and be tax-efficient for your creative business.