from HMRC
VAT and sponsorship http://www.hmrc.gov.uk/businesses/givin ... ship.htm#4" onclick="window.open(this.href);return false;
Sponsorship payments
If a charity agrees to give your company something in return for the sponsorship payment(s), then the whole of the payment is considered a 'taxable business supply' for VAT purposes. This means that the charity may have to account for VAT on the money it gets. It usually applies if you do a deal with a charity under which it's obliged to give your business something that benefits it significantly, like publicity.
For example, if your company sponsored a charity in return for the right for your logo to appear on its website, this could be a supply of services on which the charity would have to account for VAT. The size or prominence of the logo doesn't really matter - it's the fact that you've paid for the right to have it displayed that counts. The same would apply if the charity agreed to give you the right to use its own logo on your material in return for your sponsorship.
Donations
In some cases a charity may give your business something as small as an acknowledgement of your payment. It's not part of any sponsorship deal, just a way for the charity to thank you for your support. In this situation your payment is treated as a donation for VAT purposes, meaning that the charity doesn't have to account for VAT on it.
Some examples of things a charity could give you to acknowledge your support without having to account for VAT include:
• flags, lapel pin badges and stickers
• a mention in its list of sponsors - perhaps in a programme or on a notice
• naming a building or university chair after you
• putting your name on the back of a seat in a theatre
You can read more about VAT and sponsorship payments to charities in Notice 701/41 Sponsorship.
Not sure how we stand with this but its late and I havent had a beer yet
Cheers
