Tax advantages

Entering or Winning Business Awards – The Tax Advantages

In the world of business, particularly in the challenging UK market, companies are constantly vying for distinction. Besides the obvious strategies of increasing your business profile on review sites like TrustPilot and Feefo, or ensuring you have testimonials and case studies from previous customers, business awards are by far the easiest way to build trust with new leads and clients.

Benefits of business awards

These industry accolades, sought after by firms of all shapes and sizes across various sectors, are seen as a peer-reviewed recognition, boosting not only a company’s reputation but potentially enhancing its operational efficiency as well. By breaking down what makes a business work so well, it can shine a light on future improvements.

Benefits of business awards - men sitting around a desk discussing a business

Business awards have always enjoyed a measure of prestige. Google Trends data indicates a dip in their popularity during the years of the Covid pandemic, but interest has made a strong comeback, reviving to its former levels.

Google Trends data chart indicates a dip in their popularity during the years of the Covid pandemic, but interest has made a strong comeback, reviving to its former levels.

Today’s businesses and their owners are beginning to appreciate that these awards offer more than just bragging rights. They can actively propel a business into the spotlight, attracting prospective customers, tempting investors, and luring potential employees. Companies also find it much easier to retain top talent when they actively celebrate their wins.

The benefits of business awards are many, and bestow a company with prestige, attesting to its success.

Business Awards – The Tax Advantage

To fully utilise the above opportunities, businesses need to understand the associated tax implications of awards.

One often under-appreciated aspect of business awards involves their potential tax benefits. A remarkable number of business owners are oblivious to the fact that expenses incurred in the pursuit of an award can be deducted from profits when determining taxes. Such expenses are recognised as marketing or advertising, both crucial for business expansion.

As a result, the expenditure associated with entering and/or winning award competitions and promoting award wins can be categorised as ‘allowable expenses‘. For instance – using a marketing company to write or submit your awards entry, or promoting your award win using a PR agency are all recognised as being marketing expenditure. In the UK, these costs can be subtracted from the profits prior to the calculation of tax, leading to significant savings.

Tax accountant working out expenses with a calculator

Despite the undeniable potential for tax savings, many businesses are failing to seize this opportunity. This lack of awareness may stem from a belief that finding tax advantages is ‘tax avoidance’ or looking for a ‘loophole’. It’s crucial to dispel such misconceptions, as this practice is perfectly above board, and is in fact advisable by many accountants. Investing in business awards with the goal of boosting a company’s standing is a legitimate business expense, and thus, a valid deduction.

Are business awards tax deductible?

  • Yes, business awards are tax-deductible!
  • Expenses incurred in the pursuit of an award are seen as marketing or advertising costs, which are tax-deductible.
  • Costs linked to entering awards, promoting wins, and even attending ceremonies fall under ‘allowable expenses’ in the UK.
  • There are considerable tax savings by deducting these expenses from profits before tax calculation.
  • Investing in business awards with the aim to enhance a company’s reputation is a valid business expense.
  • Small business? Ask your accountant about these allowable expenses to ensure you record costs and VAT correctly in your accountancy software.

To wrap it up, the pursuit of business awards is a shrewd strategic move. It’s not just about winning accolades for good work, but also offers a significant contribution to a company’s financial well-being. It’s clear to see why business awards are returning to popularity: they are not only badges of success, but also a judicious financial manoeuvre.

Please note: Whilst every effort has been made to ensure the subject has been covered and explained to the best of our knowledge and research, you are ultimately responsible for seeking your own independent tax advice, and this content does not represent financial advice of any kind. If you are unsure about taxation, we recommend you seek advice from an accredited or chartered accountant. More info on chartered accountants in the UK can be found on the ICAEW website.

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