Dual purpose sponsorship

The taxpayer company Interfish was incorporated in 1977 and owned and controlled by C. He was keen on rugby and the company made substantial sponsorship payments to the local club.

The owner also became heavily involved in running the club being instrumental in making it more successful. He said he wanted to do this because it would help raise the profile of his company and make him well-known in the local business community.

The company claimed the sponsorship payments made by Interfish to the rugby club were deductible as expenses incurred wholly and exclusively for the purposes of the business (TA 1998 s 74(1)).

HMRC refused the claim on the basis that it had a dual purpose: the payments were at least in part to support the club and enable C to pursue his interest in it.

The First-tier Tribunal said Interfish’s payments to the...