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Tax Efficient Sponsorship and Horse Racing


Julie Butler - Expert Author

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7 July 2014

A recent report on the subject of a formal assessment on the contribution of the British Racing industry to the British economy has been published by one of the big four firms of accountants, Deloitte. The work was carried out by their Sports Business Group.

The report was commissioned by the British Horseracing Authority (BHA) and it has produced some very interesting facts and figures which support the tax efficiency of those who use racing as a sponsorship tool, whether it be through the sponsoring of a race or sponsoring of racehorses. Included in this article are various quotes from this Economic Impact of British Racing 2013 published by Deloitte. 

This is published against a background of tribunals which question the sponsorship of racing activities.  For example, Executive Network (Consultants) Ltd v O’Connor [1996] (SpC00056). This case was brought before the special commissioner following dispute with HMRC over whether the sponsorship payments were deductible from Executive Network’s taxable profits. The company had made sponsorship payments to the equestrian business of the wife of the company’s controlling director and major shareholder. The company had stated that the purpose of the transaction was to have advertising and marketing promotion through attendance at various equine events in order to increase brand awareness and thus boost custom. All this indicated to HMRC that the purpose of the payment was at least partly that of the sponsored party, and that a clear personal benefit in the decision to make these sponsorship payments. Thus deductions for sponsorship in this case were deemed not allowable for taxation purposes.

The Popularity of Racing

One key factor of the report is the popularity of racing. “Racing remains comfortably the best attended sport in Britain after football, and its festivals number amongst Britain’s sporting crown jewels.” It appears that the increased broadcasting of racing and video streaming opening racing up to international companies has helped here.  “Broadcasting has substantially grown broadcasting revenues across the evolving platforms over the last five years.”  “At the Races and Racing UK have developed their video streaming products (70m race streams in 2012) and the joint venture GBI Racing, which sells British Racing to close to 40 countries internationally, has helped grow revenues.”

In order for any business to sell their product it is essential that there is media coverage and the report by Deloitte would indicate that racing has changed and there have been a lot of recent facts and figures to support the commerciality of sponsorship of racing. The report states that: “Media – Income of £153m (2008 restated: £104m) comprises the total revenue of Turf TV, RMG, At the Races, GBI Racing plus the amounts paid to the racecourses in licence fees by Satellite Information Services (‘SIS’) and terrestrial broadcasters. The revenue derived from these rights has increased by nearly 50% since 2008, through growth in existing mature channels and the exploitation of newer media channels – notably online streaming – and a much wider scale of British Racing pictures internationally.” There has been increased sponsorship of racecourses as the report states. “Racecourses generated an estimated £31m in 2012 from sponsorship, an increase of £6m from 2008.”

Racing Sponsorship – Tax Efficiency

These improved results were against the background of a general economic downturn and the improved media rights continue.  “Racecourses will benefit from further increases in media rights in 2013, with total receipts likely to exceed £100m.” Racing is therefore enjoying a perfect storm – increased media coverage, increased broadcasting and high attendances second only to football. “Racing is the second best attended sport in Britain after football, and in 2012 accounted for four of the top ten highest attended sporting events (outside of the London 2012 Olympic and Paralympic Games).”

The tax allowability of the McQueen case sponsorship shows the benefits of TV coverage. Mr R S McQueen v The Commissions for HMRC [2007] (SpC00601). Mr McQueen took the view that motor rallying was better value as an advertisement than buying a space in a daily newspaper. Audience figures were large, and through TV coverage and repeats, prolonged the exposure throughout the course of the rally season and thus the calendar year. Mr McQueen was also able to attribute two major clients to Motor Rallying connections. Crucially, during the period under review, there had been a substantial increase in the Coach Business turnover, although it was not possible to relate the increase directly to Mr McQueen’s sporting activities.

The Special Commissioner thus concluded that “the whole of the disputed expenditure served the purpose of the [coach trade] and that Mr McQueen’s intention (in his capacity as the proprietor of the business) was to benefit the Garelochhead Coaches trade by promotion of the name and facilities offered”. The commissioner also found the “Mr McQueen was using his skill and enthusiasm for Motor Rallying as the best means available to him for promoting his business” and thus the private enjoyment he gained was seen as incidental.

Access to Larger Population – Media Rights

Racing offers great access to a larger population than just those attending the race meetings. “Broadcast coverage is a crucial ‘shop window’ for the sport, as it allows access to a greater proportion of the population than those attending race meeting.” Racing enjoys, as does football, an income from media rights. “Racecourses’ media rights revenues grew to £88m in 2012, up to £31m (54%) compared to 2008, with substantial growth across all platforms contributing to the success.” The pre-existing interest point is raised in Vodaphone Cellular & Others v Shaw [1997] 68TC376.

Any business has to enjoy strong turnover to produce a good profit. A business has to sell and achieve turnover targets to survive and this can only be achieved through some form of marketing, advertising and general public awareness. “The British appetite for sport, in absolute terms and relative to its population size, remains unmatched anywhere in the world.” The success of racing as a sport with good media coverage and high attendances at the race meetings lends itself to lots of businesses wanting to use this opportunity commercially.

Sponsorship – The Benefit in Kind

The support for football is generally fanatical hence the expression ‘football fan’ but such support can be tied into love and hate. There can be downsides to sponsorship of one team that could cause a negative impact on markets. Racing does not have this same negative, it is positive. Horses do not become something to hate, that is not the nature of the support and therefore sponsorship is very positive brand awareness and commercialism.

In the case of Chepstow Plant International & Another v Revenue & Customs [2011] UK FTT 166 (TC) the company financed the training expenses for several racehorses. HMRC sought to have these expenses treated as a benefit in kind to the director in whose name the horses ran. The director could demonstrate that he had no real interest in the horses other than for commercial motive. The director had never actually visited the trainer. In Chepstow Plant it was held that the director did not have a personal interest and he was not receiving a personal benefit in kind. Therefore, he was not liable to the relevant personal tax and national insurance on the payment by the company.


There have been a number of tribunals which have questioned the sponsorship of some sports, ie are they commercial? Often the question is asked as to whether the sport was of an interest before the sponsorship operation was undertaken. It will be important for businesses who use racehorse ownership and racecourse sponsorship to increase the sales in their businesses to ensure that they have all the evidence in place to show “cause and effect”, to ideally show that the sponsorship has the ability to increase sales and is also increasing sales. Small details should be paid attention to such as the name in the right places in the Race Card, the name brand in the right places on the paddock rug, jockey’s colours etc, and trying to organise more press publicity interviews with the media which are now so high as the figures have shown and can only be a positive. The commercial motive behind the sponsorship will also be key.

About the Author

Supplied by Julie Butler F.C.A. Butler & Co, Bennett House, The Dean, Alresford, Hampshire, SO24 9BH.  Tel: 01962 735544.  Email;, Website;

Julie Butler F.C.A. is the author of Tax Planning for Farm and Land Diversification (Bloomsbury Professional), Equine Tax Planning ISBN: 0406966540, and Stanley: Taxation of Farmers and Landowners (LexisNexis).

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Article Published/Sorted/Amended on Scopulus 2014-08-14 09:04:17 in Tax Articles

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