‘Some golf clubs will need to set up trading subsidiaries’

Martyn Clapham
By Martyn Clapham January 22, 2016 12:20

 

A tax expert has said that some golf clubs will need to set up a trading subsidiary due to a change in legislation regarding Community Amateur Sports Clubs (CASC), which comes in shortly.

Hundreds of golf clubs are registered CASCs, which brings certain tax benefits, but each one has until April 1 at the latest to consider whether it meets all the new eligibility rules – if it does not it will either have to restructure or accept that it is not eligible to be registered as a CASC.

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Adrian Houstoun

Under the new rules, a club must ensure at least 50 percent of its members are ‘participating in sport’ and the club must check whether it charges membership fees over £1,612 a year, if the costs associated with being a member of the club are more than £520 a year and where costs associated with being a member are more than £520 a year, whether the club makes a satisfactory provision for those that can’t afford to pay more than this amount.

There’s also no limit on the amount of income clubs can generate from members, but CASCs will only be able to earn up to £100,000 a year from non-member trading and property income, known as the ‘relevant threshold’.

Adrian Houstoun, VAT partner at Kingston Smith LLP, said: “If a club charges any member more than £1,612 a year for membership fees then it would not be considered open to the whole community. The club would not be eligible for CASC status even if it offered discounted or cheaper memberships to other members. When considering the cost of membership, green fees, match fees and equipment hire has to be included with membership fees.

“If you have breached any of the obligations or exemption limits you will need to either restructure, for example by setting up a trading subsidiary, or notify HMRC, which will deregister you as a CASC, and in such a case HMRC may enquire whether or not you were correctly registered as a CASC in respect of the past.

“It is likely that most golf clubs will fulfil the criteria of having at least 50 percent of members playing the sport, which might not be the case with rugby clubs where former players are often members for many years after they have ceased playing the sport.

“However the income thresholds are very important, the first point is to see whether non-member income is under £100,00 and hence the club is entitled to be a CASC, once the club has met that test the trade turnover must be less than £50,000, and the property income must be less £30,000 for the profits on these two items to be tax exempt. If you cannot meet these conditions you should look at setting up a trading subsidiary and for those activities to be carried out by it.

“The setting up of a trading subsidiary should be considered carefully. As a CASC your club is likely to benefit from 80 percent reduction in liability for non-domestic rates, and the setting up of a trading subsidiary may impact on this. The rates reduction is on the basis that the property is occupied wholly or mainly by the CASC. This means that the trading subsidiary should not be granted rights to use or occupy parts of the clubhouse.

“If the bar area is used by a trading subsidiary that has control over it that could be an issue in respect of rates reduction. However if the bar opening times, prices and what is sold are controlled by the club and the club uses the bar at other times for committee meetings and so on that should not be an issue.

“Thirdly, to qualify for the property being used wholly or mainly by the CASC, the CASC must use the property more than the trading subsidiary. This may require time records to be kept for when the trading subsidiary is utilising particular parts, for example the bar and related facilities for hire for a private wedding.

“The trading subsidiary is likely to be subject to corporation tax which can be managed by donating any profit back to the CASC. One of the limits that will be a problem for many clubs is the one that requires at least 50 percent of members to be participating in sport. This will mean that non-sporting members will have to be members of a separate entity such as the trading subsidiary.”

Contact Adrian on 020 7566 3802

 

Martyn Clapham
By Martyn Clapham January 22, 2016 12:20
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1 Comment

  1. Mark January 22, 13:25

    At £1,600+ per year, this will only affect 5% of clubs at the most surely? I pay around £1,700 at the moment but that includes a gym & country club and is by far the most expensive in the area.

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