Local amateur sports clubs may wish to register with HMRC as Community Amateur Sports Clubs (CASCs) and benefit from a range of tax reliefs including Gift Aid. This factsheet considers the tax benefits and the registration requirements that clubs have to satisfy.
Broadly a club seeking to register must:
A club is open to the whole community if:
Some objective tests have been introduced in order to determine whether costs of membership pose a significant obstacle:
HMRC examples of how to compute membership and participation costs in their guidance here.
A club is organised on an amateur basis if:
A club is non-profit making if its governing document requires any surplus income or gains to be reinvested in the club. Surpluses or assets cannot be distributed to members or third parties. This does not prevent donations to other clubs that are registered as Community Amateur Sports Clubs.
The ordinary benefits of an amateur sports club include:
HMRC, in their guidance provide examples of what are necessary and reasonable travel and subsistence expenses.
A club is allowed to:
So a CASC could pay members for services such as coaching or grounds maintenance but would not, for example, normally pay members to play. However under new regulations clubs are allowed to pay a maximum of £10,000 a year in total to players to play for the club
Eligible sports are defined in the legislation by reference to the Sports Council’s list of recognised activities. This can accessed here.
A club must promote participation in an eligible sport and also provide facilities for playing the sport. To meet this objective, a club must ensure at least 50% of the members are ‘participating members’. To be a participating member they must participate in the sporting activities of the club on a number of occasions that is equal to or more than the club’s ‘participation threshold’. The participation threshold is based on the number of weeks in the club’s accounting period.
Some clubs have the main purpose of providing social leisure facilities. If this is the case they will not be able to register as CASCs, because these clubs are principally places for people to meet for social purposes even though some sporting activities take place.
All CASCs must meet an income condition which aims to ensure that CASCs are mainly sports clubs rather than mainly commercial clubs with sports activities. The income condition applies to the turnover received from broadly commercial transactions with non-members, where the club is offering a commercial service or supply, for example sales of food and drink. Any income from renting out property is to be included e.g. renting out the club’s grounds. The maximum amount of turnover that a club may receive under the income condition is £100,000 a year, excluding VAT.
Clubs are able to generate unlimited income from transactions with their members. Investment income and donations received is also excluded from the income condition.
CASCs can reclaim basic rate tax on Gift Aid donations made to them by individuals but CASC subscriptions are not eligible as Gift Aid payments.
CASCs are treated as companies for tax purposes. Therefore their profits may be chargeable to corporation tax.
CASCs can claim the following tax reliefs:
It should be noted that if trading turnover exceeds £50,000, all the trading profit is assessable to corporation tax.
A CASC runs a trade with turnover of £60,000 and profit of £6,000. Because the turnover exceeds the £50,000 limit the profit is taxable. The CASC also has gross rental income of £12,000. The gross rental income is below the exemption limit and is not taxable.
Where a CASC receives a tax return, relief can be claimed in the return. However most clubs do not receive a tax return each year. If the club has had tax deducted from its income or if it has received Gift Aid payments, it can claim a repayment from HMRC.
Corporate Gift Aid is available for donations of money made by companies to CASCs. Companies are therefore allowed to claim tax relief on qualifying donations they make on or after 1 April 2014.
The corporate Gift Aid provisions encourage companies to make donations to clubs which are registered as CASCs but also encourage clubs with high levels of commercial trading to potentially benefit from CASC status.
A club with significant trading receipts may well not qualify for CASC status because of the trading receipts. It could however set up a trading subsidiary and donate the profits to the club. The donation received by the club will not be treated as trading receipts and thus the club could apply for CASC status. The new Gift Aid relief will eliminate the corporation tax charge on the profits of the company.
There are however other issues for the club to consider in the establishment of a trading subsidiary.
CASCs in England and Wales get the same relief that would be available to a charity (80% mandatory relief) where the CASC property is wholly or mainly used for the purposes of that club. For CASCs in Scotland, the Scottish Executive has agreed voluntary relief with local authorities for the same amount.
If your club is in the Greater London area please contact us at Naail & Co if you have any queries relating to the rules on Community Amateur Sports Clubs. We would be delighted to help.
We are always ready. Just drop us your name and number and our team will get it touch