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This publication is available at https://www.gov.uk/government/publications/community-amateur-sports-clubs-detailed-guidance-notes/annex-2-incorporating-an-existing-casc-into-a-company
1.1 Many Community Amateur Sports Clubs (CASCs) are unincorporated associations. In small clubs this is often the easiest way to set up a club, but as a club grows you may decide to incorporate in order to limit the liability of the club’s members and to enable the club to enter contracts in its own name. Some national governing bodies of sport encourage incorporation. The new company is a separate entity for legal and tax purposes and must reapply for CASC status.
1.2 If your unincorporated club is already a registered CASC and you are thinking about setting up a company to run your club instead, there are a number of things you should think about before incorporating.
1.3 This guide doesn’t cover all issues that you should think about before incorporation and is not intended to replace professional advice when it is appropriate. The guidance is for club committee members, more specifically for those with responsibility for planning and implementing incorporation. This can be a complex process and you should consider whether you need professional advice. You could also consult your sport’s national governing body who may be able to provide additional guidance and support.
2. How does incorporation work?
2.1 If you choose to incorporate, the new company will be a separate legal entity. To set up a new company you’ll need to register it with Companies House. You can’t simply convert your existing unincorporated association into a company. Your full voting members should all become members of the new company and should formally approve the conversion.
2.2 Once the new company is established you’ll have to transfer over its activities (including any employment contracts), assets such as interests in land and liabilities from the unincorporated association.
3. What type of company will you choose?
3.1 To obtain CASC status the new company will need to meet the conditions of the scheme. One of these conditions is that the club should be run by the members and that all participating members (with the exception of juniors) should be given a vote.
3.2 To be a member of a club a person must be party to the contract which is the club’s constitution. This is clear when the club is a company - members of companies are those who have the right to vote at general meetings. Most members clubs in the form of companies are limited by guarantee and the terms of membership are usually clearly defined in their constitutions. These will usually say that each member upon joining is entitled to a single vote at general meetings.
3.3 Companies limited by shares are different because voting rights are determined by the number of shares held. In the case of members clubs HMRC would expect to see an equal shareholding for each member, but this is quite difficult to achieve where members come and go. It can be done by making sure that each member is allocated a single share when they join and that this is reallocated upon leaving.
3.4 There are others which may qualify for CASC status, eg Community Benefit Societies (formerly IPSs) and Community Interest Companies. Clubs will need to seek advice on which to use.
3.5 It is particularly important that your company has a CASC compliant memorandum and articles of association. HMRC cannot backdate registration if a Club’s governing document requires amendment.
3.6 Annex 5 of this guidance provides a model memorandum and articles of association.
4. CASC status is not transferrable
4.1 If your club is already registered as a CASC and your members decide they want to incorporate, HM Revenue and Customs (HMRC) can’t simply transfer the unincorporated club’s CASC status to the new company.
4.2 Once the new company is established you’ll need to submit a new application using a CASC application form. HMRC can’t then register the new club until the assets and activities have been transferred across.
4.3 There have been some recent changes to the conditions for CASC status and it’s important that you read about these changes before deciding whether to incorporate.
4.4 This is important because a registered CASC is not allowed to transfer its assets to a company that is not a registered charity or CASC. If a CASC does transfer its assets to a company that is then refused CASC status, there’ll potentially be a capital gains tax charge on the unincorporated club which is based on the value of the chargeable assets that have been transferred.
5. Checking that the new company is eligible for CASC status
5.1 If you’d like HMRC to check whether the new company is suitable for CASC status before you make the transfer you should submit a CASC application for the new company with a covering note which:
- explains that your club intends to incorporate
- gives details of the existing unincorporated CASC and provide the last set of financial accounts
- provide a copy of the proposed governing documents (memorandum and articles of association) for the new company
5.2 HMRC will review this application and let you know whether the new company will meet the conditions of the scheme. If the new company meets the conditions of the scheme HMRC will then put the application on hold until the assets and activities are transferred across to the new company.
5.3 Once you’ve transferred the assets and activities across to the new club you should write to HMRC providing:
- 3 months bank statements in the new company’s name
- details of the date the assets and activities were transferred across to the new company
5.4 If the new company doesn’t meet the conditions for the scheme then HMRC cannot register the new company as a CASC.
6. Once you’ve transferred the assets and activities to the new company
6.1 You should tell HMRC when the assets and activities of the unincorporated club have been transferred to the new company. HMRC will then deregister the unincorporated association from the scheme and register the new company if it is satisfied that it qualifies as a CASC.
6.2 If you’ve not already done so you need to send in a CASC application form for the new company. You’ll also need to provide evidence that the assets and activities of the unincorporated club are now part of this new company. When you submit an application for the new company you’ll need to provide:
- 3 months bank statements in the new company’s name
- the last set of financial accounts for the old unincorporated association and the CASC reference for this former unincorporated association
- an opening statement of affairs of the new company detailing the assets and liabilities
- the governing document (memorandum and articles of association) for the new company
- a completed CASC application form
- the minutes of the meeting where the members voted on decision to incorporate
6.3 When the assets of an unincorporated club are transferred to a new company that will carry on the sporting activities of the original club then Capital Gains Tax will not be due. When the transfer of assets from a club to a company meets the conditions within sections 136 and 139 TCGA 1992 then no gain or loss will accrue and the new company will acquire the assets at the historic base cost on the date the assets are transferred.
6.4 A clearance request to HMRC is not needed when an unincorporated club decides to set to set up a new company that will carry on the sporting activities of the original club.
7. Checklist for incorporating a CASC
7.1 If you decide to incorporate your club you should follow the steps below:
- Review the new rules for CASCs introduced in 2015. You need to consider whether your current club is still CASC compliant. You should also consider whether the new company will be suitable under these new rules.
- Seek professional advice if you are unsure.
- Consider speaking to your sport’s national governing body.
- Decide on the type of company that you want to set up – eg limited by guarantee or limited by shares.
- Consider whether it would be appropriate to set up a trading subsidiary.
- Register the company with Companies House making sure you have a CASC compliant memorandum and articles of association.
- Send in CASC application form with supporting documents to check with HMRC that the new company is suitable for CASC status (this is an optional checking service provided by HMRC).
If your club is no longer suitable for CASC status under the rules introduced in 2015 you’ll need to contact HMRC. Some clubs that deregister will have to pay a deregistration charge based on the value of the club’s chargeable assets for capital gains purposes. HMRC can advise you whether or not this charge applies.
When HMRC agrees suitability
- Make any necessary changes to the memorandum and articles and/or to the new company’s structure or operations.
- Transfer assets and activities from the old club to the new company after dealing with any outstanding tax matters e.g. filing final Gift Aid claims and CT returns with HMRC.
- Tell HMRC that the old unincorporated association no longer exists.
- If you have not already sent in an application you’ll now need to submit a CASC application form for the new company.
8. New Gift Aid declarations
8.1 Any Gift Aid declarations that have been signed by donors to the unincorporated association will not be valid if the new company makes a claim for Gift Aid. If the new company is successfully registered with HMRC then it should obtain new declarations from donors before making any Gift Aid claims.
9. Trading subsidiary
9.1 One of the things you should consider when incorporating is whether to set up a trading subsidiary. A trading subsidiary is usually a company that’s owned and controlled by the CASC and will carry out any non-sporting or non-member trading activity.
9.2 Some clubs will be required to set up a trading subsidiary if they wish to remain in the CASC scheme following the introduction of the new £100,000 income condition. Smaller clubs may also want to consider a trading subsidiary as this may be more flexible.
9.3 Trading subsidiaries are subject to corporation tax on any profits they make. However, relief from corporation tax can be given if the trading subsidiary donates its profits to a registered CASC or charity. This relief is given under ‘Company Gift Aid’. Usually HMRC would expect a trading subsidiary of a CASC to donate its profits back to the parent CASC.
10. Other taxes
10.1 There are other taxes to consider such as Stamp Duty Land Tax if the club has an interest in land, PAYE and VAT. The appropriate HMRC office should be notified of the incorporation if the club is registered for VAT or has a PAYE scheme.
10.2 If the company is not VAT registered but has or is going to have a turnover of more than £81,000 a year, you should also register with HMRC for VAT. Unlike for charities there are no specific VAT reliefs for CASCs.