Golf Clubs – Restructuring Could Drive Tax Savings

As accountants and taxation advisers for several golf clubs, we have noticed a sharp rise in visitor fees since the covid pandemic.  This extra demand has allowed clubs to increase prices for visitors, but more income is likely to lead to more tax due.

However, unlike membership fees which are generally not subject to corporation tax, visitor fees are deemed to be trading income and therefore taxable.  The result of this is that many clubs will now potentially have to pay significant corporation tax liabilities depending on how the club is structured.

As visitor demand shows no sign of slowing down, it would therefore be prudent for golf clubs to consider tax saving options.

Obtaining Community Amateur Sports Club (CASC) Status

A CASC is a status, separate from a club’s legal structure, which gives amateur sports clubs a range of tax reliefs. CASC status is not the same as charitable status, and a registered CASC cannot be recognised as a charity for tax purposes.

If a golf club qualifies as a CASC, this can offer significant tax advantages, including corporation tax exemption on certain income.

If a golf club is successful in obtaining CASC status from HMRC, the next step would be for the club to set up a wholly owned subsidiary.  All non-exempt income, such as visitors fees, should then be channelled through the subsidiary.  To ensure that the subsidiary does not incur corporation tax liabilities it then enters into a Gift Aid arrangement with the CASC.  This allows the trading subsidiary to pay a sum of money equivalent to their taxable profits to the CASC and eliminate any trading profit.  The receipt of the Gift Aid payment from the trading subsidiary is not taxable in the CASC.  This planning should ensure that no corporation tax is payable in either entity.

CASC Tax Reliefs

A CASC benefits from tax exemption on:

• Bank interest
• Capital gains
• Gift Aid donations, including donations made by a trading company that’s owned by the CASC
• Trading profits if the turnover is less than £50,000 per year
• Property income if the total income from renting out property is less than £30,000 per year.

If the trading profits or property profits exceed £50,000 or £30,000 per annum respectively, the club would pay tax on the full profits, not just the element above the threshold.  However, any tax here can be avoided with some careful planning.

To qualify for the above reliefs, the club must use all money received to promote participation in and provide facilities for the eligible sport.

CASC Criteria

HMRC have a long list of the conditions a club must meet to qualify for CASC status, such as:

• The club must be based in the UK, provide facilities for an eligible sport and encourage participation in the sport
• The club must have a written constitution, known as a governing document, which sets out how the club meets the criteria for a CASC
• The club must be open to the whole community and have affordable membership fees (currently no more than £31 per week)
• The club must be organised on an amateur basis
• The club must be managed by ‘fit and proper’ persons.

Conclusion

This blog provides a basic overview of the conditions required for a club to qualify for CASC status.

If CASC status can be achieved and the correct structure is put in place, significant tax savings could be available.

Registering as a CASC is not a straightforward process and there is a variety of criteria to meet, but we can help you through the process as it is crucial to approach this with expert guidance.

Finally, although the key focus of this blog is golf clubs, the same principles can be applied to other eligible sports clubs.

If you would like to discuss this, please do not hesitate to contact Mark.Napier@jsca.co.uk