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This publication is available at https://www.gov.uk/government/publications/community-amateur-sports-clubs-detailed-guidance-notes/annex-1-overview-of-corporation-tax-and-vat-rules-for-community-amateur-sports-clubs
1.1 All Community Amateur Sports Clubs (CASCs) are either unincorporated associations or companies and this means that CASCs should pay Corporation Tax on any income or gains that are not exempt.
1.2 HM Revenue and Customs (HMRC) doesn’t normally expect all CASCs to complete an annual corporation tax self assessment return. However sometimes a CASC will be required to complete a return and send it to HMRC. They’ll need to do this when:
- HMRC issues a club with a return you must complete it even if you think that your club doesn’t owe any tax - you must complete this return and send it to HMRC by the deadline or you may be charged a penalty
- your club has corporation tax to pay you must complete a corporation tax return even if you haven’t been issued with one
2. Trading income exemption
2.1 Where a club is a CASC for all its accounting period and its turnover from trading isn’t more than the limit of £50,000, the whole of the profit from that turnover is exempt provided it is applied for qualifying purposes. If the limit is exceeded there is no marginal relief available and the whole of the profit will be subject to Corporation Tax.
2.2 Where a club is registered as a CASC for only part of its accounting period, the period for which it is registered is treated separately. The effect is that the club is treated as having 2 separate accounting periods, and the relevant limits and reliefs are correspondingly reduced.
2.3 For example, where a club is registered for only 9 months of a 12 month accounting period, the trading limit would be reduced as follows:
£50,000 x 9/12 = £37,500
2.4 The relief would also be apportioned accordingly. For example a club registered for 9 months of a 12 month accounting period with turnover from trading of £65,000 would bring into account £65,000 x 9/12 = £48,750. This is over the reduced annual limit of £37,500 so none of the amount would be exempt.
3. What is trading income?
3.1 For income to benefit from the trading exemption it must be trading income. The supply of goods or services with a view to making a profit will amount to trading, and the profits will be liable to Corporation Tax as trading income.
3.2 This is not normally the case where a members club makes supplies to its own members. So membership subscriptions paid to a CASC will not be trading income. Similarly, amounts paid by members to use facilities or for bar and catering are unlikely to be trading income.
3.3 Supplies made to non-members will normally be trading income. It is essential that all member and non-member income is separately recorded by the club. This information is needed to work out whether the club can claim the trading income exemption or if they have tax to pay.
3.4 Receipts from visitors who, in return for payment on a commercial basis, are allowed to use a club’s facilities will be receipts from a taxable trade in the club’s hands. This applies to individuals who arrive at a club to use its facilities on a casual basis and to groups who may book in advance.
3.5 Such visitors may become ’temporary members’ of the club. This doesn’t prevent receipts from their use of the club’s facilities from being taken into account for tax, unless their rights as temporary members (such as rights to vote at meetings, participating in club activities and exercising control over running the club), are similar to those of full members. In computing the taxable income derived from non-members in this way the related expenses will be deductible.
3.6 Income from ‘social members’ will also be considered trading income unless they are offered the same rights to vote at meetings, participate fully in club activities and generally exercise control over the running of the club as those of full participating members.
3.7 Sometimes sports clubs engage in what is known as mutual trading. Mutual trading occurs where supplies are made to the members of a club or association and any surplus profit is returned to the members. The profits of mutual trading are not treated as trading profits for tax purposes. However, a club which engages in mutual trading cannot qualify as a CASC, because the return of surpluses to members means that it will not qualify for CASC status.
3.8 In order that they may accurately identify the trading income eligible for exemption, clubs will need to keep accurate records to enable them to distinguish between non-trading supplies and profits from trading activities.
A tennis club provides tennis courts, which can be used by members and non-members. It runs a bar, shop and small cafe. The club must be able to differentiate between its non-trading transactions and its trading income.
The non-trading income would include payments from members for:
- membership subscriptions
- use of sports facilities
- purchases from bar/café/shop
The trading income would be receipts from non-members for:
- use of sports facilities
- purchases from bar/café/shop
3.8 Where a club has a fairly high turnover it might still be entitled to the trading exemption provided the proportion of that turnover relating to non-members does not exceed the £50,000 limit. It is important for clubs to record their different sources of income properly because there is just one turnover limit which applies to all the various activities. Unless clubs properly monitor their trading income they will not be able to tell when they may become liable to corporation tax and so need to make a return of income.
3.9 If a club has taxable trading income you will need to make sure that you work out your taxable profits correctly. You should work out how much trading income you have received from non-members and then you should deduct expenditure that was incurred in generating this trading income.
3.10 Usually CASCs will have 3 types of expenditure, which will be the costs:
- of providing goods or services to members
- when trading with non-members
- incurred for both of the above
3.11 It is important that the club only deducts expenses that relate to trading with non-members when calculating the level of taxable profit. That means excluding any expenditure that relates to providing members with goods and/or services, you should also apportion the expenses that are relate to both members and non-members.
4. Property Income exemption
4.1 There’s an exemption on rental income subject to a limit of £30,000 per year. The amount will be apportioned for shorter accounting periods in exactly the same way as for trading income. If your club is required to submit a Corporation Tax return then exemption must be claimed in the return, and the claim must relate only to income that is applied for qualifying purposes. It doesn’t matter who rents the property - rental income from both members and non-members is taken into consideration.
4.2 Income should only be treated as property income when it’s for the use of land or property only – for example the hire of an unstaffed function room with no catering or the rental of the grounds to another club to use. If the club provides staff or other services with the hire then it will be trading income if it is from non-members and non-taxable member income if the arrangement is between the club and one of its members.
4.3 For example, a rugby club hires out its pitch to a local business (for use when the rugby club is not open) for £8,000 a year they also earn £24,000 hiring out a hall to members and non-members. No staff, catering or security is provided with the hire of the room or pitches. This club has property income of £32,000 and will not be exempt on the profits because this turnover is more than the exemption limit of £30,000.
5. Gift Aid and interest
5.1 Income from Gift Aid donations and interest are exempt from corporation tax. There are no limits to these exemptions provided the whole of the income is applied for qualifying purposes. Where a club is only registered as a CASC for part of the relevant period interest income is apportioned as if there were separate accounting periods.
5.2 CASCs can only claim Gift Aid repayments on qualifying donations made after the date of registration.
6. Chargeable gains
6.1 Capital gains are exempt from the charge to corporation tax provided the whole of the gain is applied for qualifying purposes and the club makes a claim for exemption. The whole of the gain means the whole of the proceeds of the sale, not just the profit.
6.2 There is nothing to prevent a club from selling all or part of its land whilst a registered CASC. It may want to do so, for example, to move to better premises. Clubs can continue to provide facilities for, and promote participation in, sport during the transitional period in which they are moving by coming to arrangements with other clubs for their members.
7.1 The rules for whether a CASC needs to register are the same as for any business. In broad terms, where an entity makes any level of supplies with a taxable VAT liability, ie standard, reduced or zero-rate supplies, it is entitled to register for VAT and recover as ‘input tax’ the VAT that it incurs on costs related to those taxable supplies.
However, where a CASC makes VAT exempt supplies, or is involved in non-business activities, it won’t be entitled to recover the VAT that it incurs in relation to these. The activities of a CASC can, in certain circumstances, fall within the fundraising and sporting exemptions.
For further information on VAT registration please visit VAT Notice 700/1: should I be registered for VAT?.
7.2 A CASC is eligible for various tax reliefs but, unlike charities, there are no specific VAT reliefs for CASCs. They are not eligible for VAT relief on the construction of new buildings, for example clubhouses, pavilions, changing rooms etc.
7.3 HMRC undertakes regular checks and compliance activity on VAT reliefs claimed by all sports clubs. The penalties for issuing an incorrect eligibility certificate for construction services are equivalent to the VAT that should have originally been paid. There are higher penalties for anyone convicted of fraudulent evasion of VAT.
A CASC was building a new clubhouse.
The CASC issued an eligibility certificate to the construction company indicating that the new clubhouse was to be used for a relevant charitable purpose by a charity.
The construction company asked HMRC for advice about the certificate completed by the CASC. The company was told by HMRC that VAT should be charged at the standard rate because the club was not a charity.
The club appealed to the first-tier tribunal against the decision by HMRC.
The tribunal said that the club didn’t have a charitable purpose that is for the public benefit that falls within the Charities Act 2011. The tribunal also confirmed that the new clubhouse was not similar to a village hall and nor was it to be used for non-business purposes.
The club’s appeal against the charging of VAT at the standard rate of 20% on the cost of constructing its clubhouse was dismissed.