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HMRC internal manual

COTAX Manual

Assessing: CTSA assessments: members’ clubs and associations

There is no minimum limit of corporation tax liability for either the delivery of company tax returns or for the making of assessments. For an AP ending after 31 March 2010, any club, association or property management company must deliver a company tax return through the CT Online Service in response to a notice to deliver and must pay electronically the amount of tax due by the normal due date (Word 49KB). Its accounts may be in either iXBRL (inline Extensible Business Reporting Language) or PDF format, but it must submit its computations in iXBRL format.

See COM100020 for information on what to do if this type of company delivers its return late.

When a club, association or property management company notifies chargeability to tax, set the case up on COTAX. Unless the conditions described below apply, it will receive a notice to deliver for the first and subsequent APs.

Clubs and unincorporated associations with small tax liabilities

As a matter of departmental policy, where a club or unincorporated association does not expect its annual corporation tax liability to exceed £100 and it is run exclusively for the benefit of its own members, you should remove it from the obligation to submit a return. Wherever conditions make it possible, subject to any risk factors you may identify, it can be treated as dormant for a maximum of 5 years without being reviewed.

To see whether the organisation is suitable for inclusion in this procedure, you should review the accounts, rules and constitution on receipt of the first company tax return. Further reviews should be made of any accounts received under the periodic dormancy reviews and following changes to the rules and constitution or if the treasurer contacts you.

To be included in this procedure the company must not be a:

  • privately owned club run by its members as a commercial enterprise for personal profit
  • housing association or registered social landlord, as designated in the Housing Act 1986
  • trade association
  • thrift fund
  • holiday club
  • mutual insurance arrangement
  • company which is a subsidiary of, or wholly owned by, a charity.

Additionally, for each year of dormancy the club or organisation must not have any:

  • allowable trading losses for which it may want to claim relief
  • assets it is likely to dispose of, which would give rise to a chargeable gain
  • interest or annual payments to pay out from which tax is deductible and payable to HMRC.

When you treat the company as dormant for the first time under this provision, you must issue a (This content has been withheld because of exemptions in the Freedom of Information Act 2000) to the treasurer (or other acting person).

Returns from property management companies

This practice is also extended to a property management company if it meets the following additional criteria.

  • The company’s business consists of the management, on a non-profit making basis, of a block or blocks of flats or apartments for the owners, lessees or tenants.
  • The company’s articles of association contain rules designed to ensure that the shares in the company are owned only by the persons having an interest in the property under management. You should obtain a copy of the articles if these are not already held.
  • The company must not be entitled to receive any income from an interest in land.
  • The company must pay no dividend or make any other distribution of profit.

However, where a property management company receives service charges which it is obliged to hold on trust for the tenants under Section 42 Landlord & Tenant Act 1987, the company is liable to income tax on any interest arising on that fund. The company, in its capacity as trustee, is within Income Tax Self Assessment and may be required to make a return to the relevant Trust Office. This income is chargeable at the trust rates. Receipt of such income does not disqualify the company from the treatment described above, provided the other conditions apply.

It is therefore important to send the correct (This content has been withheld because of exemptions in the Freedom of Information Act 2000) .