[Question] As a member of a cc can I sponsor myself

[wayne123]

Hi

I am a 3rd shareholder of a small business. My 2 Partners and I ride dirt bikes and are going to start racing (amateur) this year.
I was wondering if the business can sponsor our riding and how much the sponsorship can be worth (if there is a limit) also as the recipients of the sponsorships would be liable to pay tax.

Thanks in advance for your advice.

Wayne

[Yvonne]

Wayne, my take on this is that the S.A.R.S. has done everything possible to remove any opportunities of owners of business to take personal advantage which results in a reduction in taxes.

The question is more a tax avoidance, or tax evasion?

If you can prove that the advertising generated has a direct link to the business you operate, as in profits! - and it is indeed a legitimate advertising cost, go for it.

There are so many "Creative" ways of legitimising certain expenses, such as "Team Building" if it is your "management team"?

Regarding a limit, I don't think there is one, our accountant always makes an evaluation on the turnover generated, and queries what is "reasonable"?
Reasonable to whom? as owners we never think it is reasonable!

You also need to consider the ultimate benefit you hope to gain from your business.
If the strategy is to build up the business over a certain number of years to sell, you want the declared costs and expenses to be as low as possible.
This advice may seem silly at this time, but would have an influence in the long term!

Nothing in this post is to be taken as financial advice!

Yvonne

[wayne123]

re: As a member of a cc can I sponsor myself

Thanks for the advice Yvonne.

It most certainly is our management team and therefore could fall into the category of team building.

Now here is the difficulty.

When I financed my bike Wesbank Leisure finance would not finance it in my company's name but insisted that it was done in my name. So therefore for the company to pay the monthly installment the money would be going directly to my account, would I then be liable for personal tax on that amount? Even though the amount is called “team building� in my company’s figures.

Thanks Again

Regards

Wayne

[Dave A]

I like Yvonne's ideas.

I think the key here is to see the bike sport as a separate business unit, either for each of you as individuals, or as a team. This means in the worst instance you will have the sponsorship as income, but you'll also be able to claim all the expenses that go with the territory as those expenses are a necessary part of obtaining the income.

The only warning I can think of is that SARS may get twitchy if you keep showing a loss year after year.
There also might be an "arms length" issue if the purpose would appear to be tax avoidance.

[Yvonne]

Wayne,

Hey! I was actually giving a "tongue in cheek" reply regarding the team building, and the many forms of creative bookkeeping.

If I was a S.A.R.S. inspector, have to tell you I would assess this as tax evasion, unless there is a proven link to obtaining new business as a result of the sponsorship.

Definitely pay for the bike in your personal capacity, and the sponsorship should never be linked to the monthly payment of the bike.
Perhaps an annual sponsorship, and pay the bike off totally, but never a monthly payment, that would be asking for a problem.

Yvonne
Yvonne

[wayne123]

Thanks to you both. I have send your Ideas to our bookkeeper and asked her to start doing some research.

Keep well

Wayne

[Marq]

but never a monthly payment, that would be asking for a problem.

Yvonne.What problems do you see here?

I would just rent the bike out to the Company to the value of the repayments + mileage, wear and tear and write it down to Company vehicle expenses....all in line with downsizing and recession related problems initiated by management to survive in this gloomy political landscape. (must use current buzzwords)

On your personal side tell the receiver about your bike rental business where at the moment the expenses and monthly running costs are equal to the income charged for and provide them with a plan for their comment that includes words about future development and inclusion of all bee participants and transformation to bio fuels and saving the planet stuff. (again use the correct PC words)

This way the receiver would be hard pressed to claim tax evasion from someone who was not only supportive of bee/aa, developing staff, transforming his business in struggle times nogal, but was also a keen contender of the green party award and saved millions from extinction so ensuring the continued survival of the receivers pipeline of many brazilians of rands.

[Dave A]

If you're not a farmer or in some other line of business where the fact they're not street legal wouldn't be a problem, it might be a bit tricky to claim a business related (commuting or delivery) purposes since they're off-road bikes.

[Marq]

mmmmmm.........methinks with potholes and poor road conditions being more of an issue these days along with not being able to recognise street names or the fact that some of our roads do not have any names......it would be proactive to purchase off-road machines as company vehicles and ensure the flow of income.

Street legal? Whats that? 10 million taxis cannot be wrong along with a few million should be off-road vehicles. Also a good reason to go this motocross route.

[Dave A]

Fair comment

[Yvonne]

Thanks for the chuckles!

You seem to know how the system works, so go for it!

Yvonne

[anakin]

I think it could qualify as company's Marketing/Advertising expenses since the exposure will be created at racing venues...