Sponsorship payments not tax-deductible where duality of purpose

In the long running saga of Interfish, , which we first reported on in October 2012, the Court of Appeal ([2014] ECWA Civ 876) has upheld the decisions of both the First and Upper Tier Tribunals, confirming that the payments made to Plymouth Albion Rugby Football Club were not deductible expenses of the company as they served a duality of purpose.

Commenting on the evidence before him, Lord Justice Moses noted:

‘In the instant appeal there were two purposes found, and one of those purposes was not the purpose of the taxpayer’s trade; there is no warrant for distinguishing between the two purposes by assessing one as being intermediate or subordinate to the other.  …

I would dismiss the appeal.  In the First-tier Tribunal Judge Nicholas Paines QC said:-

“The outcome will be different only if there were a rule that a purpose that is pursued with a view to an ulterior purpose somehow drops out of the picture, but such an approach would be inconsistent with the nature of the exercise prescribed by the authorities, namely, that of identifying the purpose or purposes being pursued.”

I need say no more than that.’

The Court of Appeal decision further highlights the difficulty in claiming deductions for sponsorship payments particularly where the payments are made to an organisation in which the directors of a company have a personal interest.

If you require any further information in relation to this case please call the TaxDesk on 0845 4900 509 and ask for Paul Howard.