CYCC News 19 April 2002

Chancellor offers Tax Relief to Community Amateur Sports Clubs

In the 2002 Budget statement, Chancellor Gordon Brown announced a welcome package of tax breaks for community amateur sports clubs (CASCs). The RYA joined in the CCPR campaign to lobby for this tax reform. The new system will apply from 2 April 2002 and operates as an alternative option to registering with the Charity Commission, previously announced in November 2001. Clubs will need to consider carefully the merits and de-merits of each scheme, as individual circumstances will differ.

Which scheme is 'better'?

Charitable status will provide a full range of tax relief, including 80% mandatory business rate relief (with the remaining 20% at the discretion of the local authority).

	Charities	CASCs Tax Relief
	• Disposals exempt from capital gains tax • Gift aid on individual donations; • Gift Aid on company donations; • Inheritance tax relief on gifts; • Gifts of assets on no-gain, no-loss basis for capital gains; • Business relief on gifts of trading stock; • Payroll Giving; • Relief on Gifts of shares; • Relief on gifts of land and buildings; • 80 per cent mandatory business rate relief (with the remaining 20 per cent at the discretion of the local authority).	• Fundraising income up to £15,000 exempt from tax; • Income from interest exempt from tax; • Rental income up to £10,000 exempt from tax; • Disposals exempt from capital gains tax; • Gift aid on individual donations; • Inheritance tax relief on gifts; • Gifts of assets on no-gain, no-loss basis for capital gains; • Business relief on gifts of trading stock.

 

Business rate relief is not available under the CASC Tax Relief scheme, which provides a more limited range of benefits. For many clubs, rate relief is the most significant of these, and that only comes with charitable status. Neither scheme gives relief for VAT, which is a significant hurdle for CASCs engaged in construction contracts.

 

Are yacht clubs eligible for charitable status?

The Charity Commission's test is “the promotion of participation in healthy recreation by the provision of provision of facilities for participation in particular sports.” There is Court of Appeal authority in 1895, to the effect that encouragement of a 'mere sport' (in that case yacht racing) is not a charitable purpose. The intended recipient of the gift in that case was the Yacht Racing Association, the predecessor of the RYA. The Charity Commission's new scheme concentrates on the provision of healthy recreation through sport, rather than the encouragement of sport as such. In its own words: "A sport cannot count as healthy recreation if it makes no contribution at all to physical health." Unless the club provides facilities for members to sail, such as boats and clothing, it may be difficult to satisfy the requirement of community participation. The Charity Commission has cast doubt over whether 'ocean yachting' would qualify, largely on grounds of cost, but if a club's activites were geared to maximising participation by persons of modest means, that might qualify. Clearly activities such as a bar and catering are non-charitable and would have to be run outside the charity itself, for example in a separate company.

What will it cost to apply?

Both schemes have compliance costs, but these will almost certainly be greater in the case of charitable status. There are one-off costs, such as making the club's constitution conform to one or other scheme, and running costs in accounting procedures appropriate to the scheme in question. Where a CASC becomes a charity its property would cease to belong to the members, and instead become charitable property.