Businesses at risk of tax compliance mistakes, as summer sporting season begins

London, UK – From Wimbledon and Formula 1 to the Golf Open teeing off this week, the British summer sporting season has launched and, accountancy firm Price Bailey says British businesses could be unknowingly putting themselves at risk of HMRC penalties. 

According to tax specialists at leading chartered accountants and business advisory firm Price Bailey, the summer season tends to see an increase in businesses investing in ‘gifts’. From influencer campaigns to VIP experiences and corporate giveaways, ‘gifts’ can put many businesses in danger of missing hidden tax compliance requirements.

Tax specialist at Price Bailey, Anais Ortega comments:

“While summer sporting and entertainment events are a prime opportunity to build brand loyalty, develop stakeholder relationships and boost marketing efforts, often the tax and VAT classification of gifted event items is overlooked or misattributed. Mistakes when it comes to these classifications puts businesses in the firing line of costly financial penalties.”

According to Ortega, the riskiest gifts are those incorrectly categorised, such as client entertaining and marketing expenses. Ortega says: “Client entertaining is not tax deductible, but marketing expenses are, so for the latter companies can save 25% of the relevant expense on their tax bill. Events can blur the lines between entertaining and marketing and if a business incorrectly categorises certain spend, they could be charged a penalty of up to a 100% of the tax underpaid – it’s an expensive mistake.”

This year’s F1 saw an influx of celebrity influencers posting content and sharing snapshots from the event. Price Bailey warns that, where influencers or other personalities are given a ticket to an event with the understanding that they will provide a service in exchange for it, things can get tricky. While this could be a deductible marketing expense for the company who provides the ticket and receives the promotion in exchange, the ticket may in turn be seen as a payment in kind and need to be declared on the recipient’s self-assessment tax return. Price Bailey says it’s important for businesses to make recipients aware of the possible tax implications when awarding them tickets or other benefits in exchange for social media influence or promotion.

Also commenting on the VAT implications of gifting, Ortega says:

“What is also often overlooked by businesses, is when you gift an item in exchange for a service, such as a social media post, VAT still applies. This is the case despite having not directly sold an item, as the value is gained through the advertising from that gift.”

Price Bailey says that while some business expenses are tax deductible, if there is any uncertainty, it is advisable to seek professional tax advice, to avoid costly un-planned tax bills in future.

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