Spring 2014 Newsletter
Will we see lots more sports clubs becoming Community Amateur Sports Clubs?
Sports clubs that promote active participation in approved sports have been able to register with HMRC for a range of tax benefits since 2002. Currently there are around 6,500 clubs which have registered as Community Amateur Sports Clubs (CASCs). In 2014, improved tax benefits will be available to encourage more clubs to register. The Government states that over 40,000 clubs have the potential to benefit from the rules.
The range of tax benefits available to registered CASCs is now due to be as follows:
- corporation tax exemption for interest, trading turnover of up to £50,000 (previously £30,000) per annum and rental income of up to £30,000 (previously £20,000) per annum
- exemption from corporation tax on chargeable gains for any disposals of the assets of the club
- at least an 80% exemption from business rates.
It should be noted that if trading turnover exceeds £50,000 (or rental income exceeds £30,000), all the trading profit (or rental income) is assessable to corporation tax.
The exemptions from corporation tax only apply if the CASC uses its funds for providing facilities for approved sports or promoting participation in those sports.
There is an additional tax benefit available where individuals make donations and gifts to the CASC known as Gift Aid relief. The prospect of Gift Aid relief may on its own be a sufficiently important factor to merit a club applying to be a registered organisation. The Gift Aid relief works in the same way as gifts made to charities by individuals, in that the club will be able to make a claim for repayment of basic rate tax on qualifying donations.
From 1 April 2014 there is a proposed new tax break. Companies will be able to donate money to the club and obtain a deduction against profits for the donation. This is known as corporate Gift Aid. The corporate Gift Aid provision will not only encourage companies to make donations to clubs which are registered as CASCs but will also encourage clubs with high levels of commercial trading to fully benefit from CASC status. A club with trading receipts above £50,000 will pay corporation tax on its profits. 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. The new Gift Aid relief will eliminate the corporation tax charge on the profits of the company.
Other changes to Regulations have been made relating to the eligibility rules for CASCs. The aim is to have clearer rules and to allow more clubs to register.
One example of this is that there will be expanded scope to pay player fees and expenses, subject to limits.
A club will need to consider whether the eligibility rules will require certain changes to the running of the club and whether these changes are worth the tax breaks that are on offer.
If you would like any further advice, please do not hesitate to contact us.