Whatever the size of your club, you will most likely come across tax at some point.
And getting to grips with tax can help your club pay the right amount and potentially save money where possible. Here is some information to help you understand what you need to know but we always recommend you seek professional advice in relation to tax issues as we cannot provide advice that meets individual club circumstances.
From April 2019, the government are introducing a new digital tax system called . Every club needs to be aware of this new law and plan ahead! But, first, let’s get to grips with the basics.
Q What taxes could affect my club?
A There are fOUR main taxes that may affect your club:
- Corporation Tax: If you make a profit
- Payroll Taxes: If you pay people
- VAT: If you sell goods or services
- Property taxes: If you sell or occupy property
Q Is my club registered for tax?
A Depending on your previous history, your club will probably fall into one of the following categories:
- Not registered at all
- Registered for all the taxes applicable to you
- Not registered for all the taxes applicable to you
Q Does my sports club need to be registered for tax?
A Yes, every club, small or large, should be registered with HMRC as a business for tax.
If you are not registered at all, you can register your club by signing up to the Government Gateway. Once you are registered online with HMRC, you can then register the taxes that are applicable to your club.
Q I have heard of Making Tax Digital – what is it and will it apply to my club?
A This is a new law from the government to make sure everyone is registered for tax and pays the right amount. It will most likely apply to your club.
OK, now you know how to register, now it is time to find out what taxes are applicable to your club by choosing the options below:
Q Should my club pay Corporation Tax on its profits?
A Yes, unless your club is exempt.
Q Is my club exempt and what exemptions are there?
A This will depend on how your club is run and whether you qualify for the exemptions. The main exemptions are listed below:
You only have to pay corporation tax if your club trades. There must be an element of commerciality or an intention to make a profit. It can be rather a grey area so it’s a good idea to seek professional advice if you are considering this exemption.
Your club may carry out mutual trading. If so, any profit generated may be exempt from corporation tax. Where members come together to form a club, the activities carried out amongst themselves do not amount to a trade as the activities lack the necessary commerciality.
Community Amateur Sports Clubs (CASC)
If your club is registered as a CASC, then providing your income is within certain limits, your profit would be exempt from corporation tax. For the latest limits and exemptions for CASCs, click here.
Your club may be able to apply for full charitable status with the Charity Commission. If your club is successful, income used for charitable activities may be exempt from tax. Further information on the tax reliefs for charities can be found here.
Q Will I still have to pay corporation tax if exempt?
A Possibly, but this will depend on the exemptions applicable to your club.
Some income, like investment income e.g. bank interest, would still be taxable for mutual trading but not for CASC trading or charities. Also, any profit on the sale of property is potentially taxable (see property tax section) unless exempt under the CASC or charity exemption.
Q What does my club have to do?
A Every year, your club will need to file a tax return called form CT600.
The form should be filed with HMRC via your online business tax account. The form needs to be submitted within 12 months of your financial year end and any payment of tax due must be paid within nine months of your financial year end.
Q Can my Club claim back the VAT it pays?
A Your club can only claim back VAT from HMRC if it is VAT registered.
Q Should my club be VAT registered?
A VAT registration is either compulsory or voluntary.
You will have to register your club for VAT if it exceeds the current VAT registration limit. If you are under the limit, you voluntarily register your club if you think your club can benefit by claiming back more VAT than it pays.
Q What is the current VAT registration limit?
A The limit will change every year but from April 2017 it was £85,000.
You can check the latest rate changes here. It is important to note that not all income may count towards the £85,000 limit. For example, grant income is outside the scope of VAT whilst other sporting income might be exempt from VAT. Your £85,000 income limit is everything that isn’t exempt or outside the scope of VAT.
Q What income is exempt from VAT?
A There are many sporting activities that are exempt from VAT.
But there may well be some income streams where you need to charge VAT if you are VAT registered. Even if you are not VAT registered, it is recommended that you are aware of the VATable income streams and keep a running total - that way you’ll know if you reach the income threshold and need to register.
As there are many different types of income, HMRC has produced a notice explaining the VAT treatment of each income source. You can check this here.
Q Would it be beneficial to voluntarily register for VAT?
A It may be beneficial for your club to register for VAT voluntarily, even if you are under the limit.
This would be the case where you may be able to reclaim some VAT and so obtain a VAT refund. However, professional advice should be taken before voluntarily registering in order to fully understand the advantages and disadvantages of VAT registration.
Q Should my club run a payroll?
A If your club pays people to do work for the club, you may need to register with HMRC as an employer and run a payroll.
Q Can I pay people as self-employed instead of through payroll?
A Your club should carefully consider the employment status of the people you pay in your club.
A worker’s employment status will decide whether you should pay a worker through a payroll and deduct tax. If you are in any doubt, you can check a workers status by completing the following questionnaire.
If your club pays an honoraria (this is a voluntary payment given to a person for unpaid services), this is potentially taxable and should be put through a payroll.
Q How do I start a payroll?
A You first need to register as an employer with HMRC: More info here.
You now need to decide whether to pay someone to run a payroll for your club or choose to run a payroll yourself. If you choose to run the payroll, you will need appropriate software. Guidance on how to set up a payroll can be found here.
Q What are my responsibilities as an employer?
A Becoming an employer comes with many responsibilities.
It is important for each employee to have a contract of employment. There are many different types of contract. There is more information explaining this here.
Q Which property taxes can affect my club?
A The main property taxes that could affect a club are:
- Business Rates – payable if you occupy property, e.g. if you own or lease your club
- Capital Gains Tax – if you sell land/property and make a profit
Q Is my club exempt and what exemptions are there?
A Your club may be eligible for exemption if it is registered as a Community Amateur Sports Club (CASC) or charity:
Business Rates: Your club can apply for rates relief.
Sale of land: Tax reliefs may be available to reduce or defer some tax due. Registering as a Community Amateur Sports Club (CASC) or charity may make your club exempt from any gain on the sale of assets.
Further information can be found here.
Q Will I still have to pay tax if exempt?
A This will depend on whether your exemption fully or partially covers any tax due:
Business Rates: Your club can apply for 80% rates relief. A further 20% relief may be available depending on your local council. Contact your local council and ask for discretionary relief.
Sale of land: Registering as a Community Amateur Sports Club (CASC) or charity may make your club fully exempt from any gain on the sale of assets.
Q What does my club have to do?
A Most property tax exemptions for clubs arise from being registered as a Community Amateur Sports Club (CASC). However, there are both advantages and disadvantages of CASC:
- Consider carefully whether your club is able to register as a CASC. More info here.
- Seek professional advice to fully understand all property tax issues as there may also be VAT and corporation tax issues to consider.
Learn more about club finances in Wales
Club Solutions was created to help sports clubs and volunteers in Wales. So, if you have any further questions about sports clubs and tax, please feel free to get in touch with our friendly team, or let’s chat on social!