Corporation Tax: deductions for contributions to grassroots sport
Published 5 December 2016
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Who is likely to be affected
Corporation Tax (CT) payers making contributions to grassroots sports.
General description of the measure
This measure extends the circumstances in which contributions to grassroots sports can be deducted from the taxable profits of CT payers. Companies will be able to make deductions for all contributions to grassroots sports through recognised sport governing bodies, and deductions of up to £2,500 in total annually for direct contributions to grassroots sports. Sport governing bodies will be able to make deductions for all their contributions to grassroots sports.
Policy objective
This measure will make it easier for CT payers to receive a deduction for contributions to grassroots sports, thereby encouraging sports participation at a local level, and reducing administrative burdens for some organisations which currently make contributions to grassroots sports.
Background to the measure
The government announced at Autumn Statement 2015 that it would consult on how to expand the support that can be given to grassroots sports through the CT system. The consultation was launched on 24 March 2016 and closed on 15 June 2016.
Detailed proposal
Operative date
This measure will have effect in relation to qualifying expenditure incurred on or after 1 April 2017.
Current law
Currently, the following provisions provide a relief for CT on payments to sports clubs or in connection with sporting events:
Under section 189 of the Corporation Tax Act 2010, sporting bodies registered as charities can receive payments that can be deducted against the donating company’s CT liability.
Under section 202 of the Corporation Tax Act 2010, payments made to Community Amateur Sports Clubs (CASC) can be deducted for CT in the same way as payments to a charitable body.
Otherwise, section 54 (1) (a) of the Corporation Tax Act 2009 is likely to prevent payments being deductible for CT because they do not meet the test of being ‘wholly and exclusively for the purposes of the trade’.
Proposed revisions
Legislation will be introduced in Finance Bill 2017 to amend Part 6 of the Corporation Tax Act 2010 to allow qualifying expenditure on grassroots sports as a deduction from the company’s total profits in calculating the CT chargeable for an accounting period. This follows the normal rules for deductions against total company profits for charitable donations, as per Part 6 of the Corporation Tax Act 2010. Qualifying expenditure will be drawn quite widely and will, for example, include payments to coaches and officials. However, no payments to participators will be eligible, other than to cover the cost of travelling to competitions.
The legislation will contain similar protections to the charity and CASC legislation to ensure that payments are made for the intended purposes and to prevent payments being made for personal benefit.
Summary of impacts
Exchequer impact (£m)
| 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 |
|---|---|---|---|---|---|
| - | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure relates to CT deductions and is not expected to significantly impact on individuals or households. It is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is expected that there will be a beneficial impact for people in all of the groups with protected characteristics but it is not anticipated that there will be any adverse impacts.
Impact on business including civil society organisations
This measure may have an administrative impact on some organisations which currently make contributions to grassroots sports through charitable organisations set up specifically to benefit from a CT deduction.
As a result of this measure, contributions can receive a CT deduction even when they are not distributed via a charitable organisation. As such, organisations may choose to deregister their charities and instead receive deductions through the simpler route of direct contributions to grassroots sports.
Overall, there will be a negligible one-off cost for sport governing bodies and companies familiarising themselves with the new rules and perhaps deregistering their charities with HM Revenue and Customs (HMRC), and a negligible ongoing administrative burden saving from no longer needing to submit tax returns to HMRC for those charities. There are also likely to be wider administrative savings associated with deregistering charities.
Operational impact (£m) (HMRC or other)
The Information Technology impacts of the measure for HMRC are expected to carry a one-off estimated cost of £275,000.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be subject to ongoing monitoring of information collected on tax returns.
Further advice
If you have any questions about this change, please contact Rawfiah Choudry on Telephone: 03000 559565 or email: rawfiah.choudry@hmrc.gsi.gov.uk.