VAT & Sponsorship of sports club

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Setanta12

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We have a foreign sponsor who is willing to sponsor junior and senior team jerseys/kit for (say) 3,000 euros.

Obviously we're not a business, or engaged in the course/furtherance of a trade, so we invoice the sponsor 3,000 and ignore VAT.

Thing is, that sponsor then has to self-account for VAT at that country's own rate - adding to the sponsor's total cost i.e. 3,000 plus that country's VAT, (say) 500; a total of 3,500.

We could invoice for (say) 2,500 and receive the 2,500 and the sponsor will then self-account for the VAT hit to himself of 500 i.e. total net cost to him of 3,000 but the benefit to us would then only be 2,500.

500 is a lot of cash to our club. And the sponsor can't move above 3,000.

Am I correct in all the above ? Is there a more usual/efficient way of doing this ?
 
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Why would you invoice the sponsor? You're not selling a product or service to him.

Donations like this don't usually get invoiced, to the best of my knowledge.
 
For their own business records, and we are supplying a promotional activity/service to them.
 
This talk of a a VAT charge for themselves is nonsense.

If they gave a cheque for 3 grand to a sports team in their own country would there be any VAT involved? No, of course not.

So if they give the same cheque to a club in ireland what's the difference? None!

I assume by saying you're providing a service, you just mean their name will be associated with the club as sponsors...
 
Receipt is fine. This is a donation and treat it as same.

Even if regarded as advertising, give a receipt.

Either way, no VAT issue here for either party.
 
What we do is get the jerseys, equipment etc invoiced directly to the sponsor. This way they can claim back the vat.
 
The issue of a singular invoice wouldn't be persuasive evidence in an argument that we are trading or in the course or furtherance of a business.

Some (most?) business entities require invoices for their own internal accounting procedures/policies, the promise of a receipt after receipt of payment wouldn't wash with everyone/every organisation/their auditors.

@T McGibney - am I correct in my understanding on this post/previous posts ?


Re donations.
In order for our sponsor to claim the expense as a donation; haven't the Revenue tightened up on this ? Must be a registered charity etc etc ? Admittedly, my knowledge of the new rules here is almost non-existent ... ...
 
Kildavin said:
The issue of a singular invoice wouldn't be persuasive evidence in an argument that we are trading or in the course or furtherance of a business.

Some (most?) business entities require invoices for their own internal accounting procedures/policies, the promise of a receipt after receipt of payment wouldn't wash with everyone/every organisation/their auditors.

@T McGibney - am I correct in my understanding on this post/previous posts ?
Click to expand...

Sorry, I can't fathom the logic of what you are trying to do here. You would probably be best off letting your sponsor look after their own VAT & tax deduction obligations, otherwise you might be on very dangerous ground if Revenue become concerned about any VAT recovery scheme you suggest to your sponsor.
 
@ T McGibney.

Apologies; I'll try explain again.

Our (potential) sponsor has a maximum spend of e3,000. As he will have to self-account for VAT, it looks like we will have to settle for a e2,500 sponsorship amount ?

The physical 2,500 which the club will receive, plus the VAT will come to roughly 3,000.

Is this the correct way to treat this ? Is there any other (legal) way for a higher net cash benefit to the club but with a maximum cost to the sponsor of 3,000 ?

(With sponsors, and esp for low amounts such as this - you have to be able to take them through the ramifications of their sponsorship and be clear about all the implications as they may otherwise feel its too much hassle)
 
@ T McGibney

If our Club were a VAT registered entity, and our sponsor Irish - we would issue a VAT invoice for Net 3,000 plus VAT. The sponsor would pay the 3,000 plus VAT and claim back the VAT.

But if the sponsor was foreign in this scenario, then the sponsor would self-account for VAT ?

And taking it a further step:- if we, the club, isn't VAT-registered and issues a normal invoice to that foreign sponsor - what happens here?
 
Kildavin said:
@ T McGibney

If our Club were a VAT registered entity, and our sponsor Irish - we would issue a VAT invoice for Net 3,000 plus VAT. The sponsor would pay the 3,000 plus VAT and claim back the VAT.

But if the sponsor was foreign in this scenario, then the sponsor would self-account for VAT ?

And taking it a further step:- if we, the club, isn't VAT-registered and issues a normal invoice to that foreign sponsor - what happens here?
Click to expand...

You're not selling the jerseys to the sponsor so how can you issue an invoice to them!
 
Invoicing them for a sponsorship/advertising service - their name on the jerseys.

(It just so happens that the amount we are charging for the sponsorship/advertising equates to the cost to the club of the jerseys.)
 
Kildavin said:
Invoicing them for a sponsorship/advertising service - their name on the jerseys.

(It just so happens that the amount we are charging for the sponsorship/advertising equates to the cost to the club of the jerseys.)
Click to expand...

There's no taxable supply of services, you're making this much more complicated than it needs to be. Their names on your kit isn't an advertising service, it's ye acknowledging their sponsorship of said jerseys.
 
@ Mandlebrot

I hope you're correct.

In the UK, the Inland Revenue (Vat Notice 701/41), which is persuasive in an Irish context where the Irish revenue haven't provided guidance, demands that the recipient of sponsorship issue a VAT invoice where the sponsor is Vat-registered.

Most tax-accountants, I believe, in the absence of Irish guidance will follow UK guidance.
 
Kildavin said:
@ Mandlebrot

I hope you're correct.

In the UK, the Inland Revenue (Vat Notice 701/41), which is persuasive in an Irish context where the Irish revenue haven't provided guidance, demands that the recipient of sponsorship issue a VAT invoice where the sponsor is Vat-registered.

Most tax-accountants, I believe, in the absence of Irish guidance will follow UK guidance.
Click to expand...

Sigh... I'm not sure why you're in here asking questions when you've clearly read up so much on the topic, or at least you could have incorporated your last post into your OP..!?

Anyway, I am not aware of anything specific guidance one way or the other in an Irish context, but I would make the following points (having read the HMRC VAT Notice):


  • I would firstly argue it is not a taxable supply in your in instance, as S.2 VATA1972 requires that in order for a supply to be liable to VAT it must be a supply by a Taxable Person in the Course or Furtherance of a Business. To the extent that your supplies of such "Services" do not exceed the VAT registration threshold then there is no requirement on your organisation to be registered / charge VAT on such supplies.
  • I would still argue that notwithstanding the definitions drawn in the HMRC VAT Notice 701/41, depending on the terms of the arrangement with your sponsor, there is no "Service" of any tangible benefit being provided by your club in return for the sponsorship. Acknowledgement of a sponsor by displaying their name on your jerseys is not the same as advertising their company's products / services. I think you need to step back and look at the commercial reality here - there is no way that Revenue could assert that the sponsor receives 3k worth of "advertising" for their money. The substance of the transaction is that it is a donation. The fact that the club receiving the sponsorship is happy to display the sponsor's name on their kit is not necessarily of any tangible benefit to the sponsor.
Finally, if you want Irish guidance, why don't you just ring the tax office? (That'll really make somebody's day...!)

EDIT: Even IF (and I say IF very dubiously), the supply is a taxable supply by your organisation to a company registered for VAT in another EU country, their self-accounting for the VAT would just mean they simultaneously charge themselves VAT and reclaim it (as they would be entitled to deductibility if it is an invoice for "advertising"), so the cost to the sponsor remains whatever amount they wrote the cheque for... I REALLY don't see what the problem here is, haven't really got anything more to say so I think I'll bow out of this thread now.
 
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