HMRC has published an updated Sponsorship VAT Notice (701/41) to improve and clarify the guidance. This is welcome news as the Notice had not been reviewed in full since its original publication in 2002.
Following consultation with stakeholders including the Charity Tax Group’s VAT Expert Group, paragraphs 1.1, 1.2, 2.1, 2.2, 4.3 have been amended to provide clarity on the existing information, and a new section 5 has been added on crowdfunding. The relevant links can be found below.
- Scope of the Notice
- Definition of sponsorship
- When you’re making taxable supplies if you get sponsorship
- Types of support that are not liable to VAT
- Mixed sponsorship and donation
- When you make taxable supplies if you sponsor somebody
- Accounting for VAT
- Work out the value of the sponsorship you get
- Special rules for charities
- Sponsors that are not in the UK
- Issuing a VAT invoice
- Sponsored prizes for competitions
- If you receive prizes to use in competitions
- Providing prizes for a competition
- Claiming input tax on the prizes you receive for competitions
A number of the textual changes proposed by CTG have been accepted which is encouraging. We had encouraged HMRC to include substantive additions to section 2.3 Mixed sponsorship and donation in respect of issues relating to use of a charity’s name and charity of the year and will continue to call for further review of the guidance to make it as practical as possible for charities.
If you think there are any other issues that the guidance should address or if you would like to recommend additional clarifications to the existing guidance please contact us at [email protected].