Confirmation of the Revenue's position is expected to bring savings of up to £500,000 a year to athletics.
It follows a lengthy court case between the Revenue and the British Olympic Association to decide whether the money should be taxed.
Following the decision the BOA said it was actively involved 'with a number of new and potential sponsors' and expected to announce a raft of new deals in the new year.
The BOA already makes an estimated £4m a year in sponsorship from companies such as Rover, British Airways, Kellogg's and Adidas. Sponsorship deals leading up to the 2004 Olympics add an estimated £20m to that figure.
Sports organisations are treated as companies and taxed on the full amount of their income from donations and sponsorship.Before the case the Revenue treated sponsorship money as profit and charged corporation tax on it. Expenses are not deductible for tax purposes because the Revenue says they are not 'wholly and exclusively incurred for the purposes of the trade'. There are no exemptions for sporting organisations and they cannot claim charitable status.
But the BOA successfully argued that it spent all its income on training athletes and sending teams to compete abroad and so should be exempt. The tax taken from the BOA had been expected to reach £10m over the next four or five Games, according to advisors to the association.
The BOA said: 'Without this sort of support the BOA would not be able to give our athletes the opportunity to achieve their full potential in Sydney next year.'
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