News – Summer 2020
CORONAVIRUS (COVID-19) UPDATE
Extended Coronavirus financial support
CASCs should make the best use of Government support to help their finances during these difficult times. The Coronavirus (COVID-19) Job Retention Scheme has been extended until 31st October with slightly different arrangements towards the end of the scheme. A Coronavirus Job Retention Bonus of £1,000 per furloughed worker will also be available to employers from 31st January 2021 (subject to conditions). In addition, the Coronavirus Self-Employment Income Support Scheme has been extended; CASCs and their self employed suppliers e.g. coaches need to confirm continued eligibility in order to receive support and make appropriate timely claims for grants to HMRC. Lastly, CASCs with clubhouses may find that the reduction in the VAT rate to 5% on food and non-alcoholic drink sales should also help bolster finances.
Gift Aid to boost finances
CASCs may be entitled not only to direct Government support by way of grants but can also use gift aid which provides cash rebates of 25% from HMRC on qualifying donations. Professional advice is often appropriate to ensure the gift aid rules are complied with.
Corporation Tax considerations
Sports clubs registered as CASCs receive certain Corporation Tax (CT) benefits, however they do need to consider their corporation tax obligations. There are limited exemptions for CASCs such as trading income up to £50,000 pa of turnover (e.g. non-member sales at the bar) and £30,000 pa of gross rental income (i.e. before expenses). Whilst the Coronavirus lockdown may have reduced the possibility that either of these limits has been exceeded during the current financial year, receipt of grants under the Retail, Hospitality and Leisure Grant Scheme and other Government business support measures may have a CT impact. This newsletter will provide future updates when the position becomes clearer.
Potential ways to minimise Corporation Tax
CASCs should review their CT liabilities and consider if they have tax to pay. Possible ways to minimise CT include, for example, claiming the structures and buildings allowances for capital expenditure on new facilities and grass roots expenditure relief.
CASC Trading Subsidiary
Some CASCs have set up a trading subsidiary to comply with the £100,000 pa income condition or to ensure that profits from non-playing activities such as bar and catering are free of corporation tax where the exemption limits are exceeded. The subsidiary should make a corporate gift aid payment of its profits to the CASC within 9 months of its year end. In order for such payments to be legal (and tax free) the subsidiary must have distributable reserves at the time of the payment. Lockdown may have created losses in the subsidiary thus affecting its distributable reserves. CASCs with trading subsidiaries should carefully review the position before making corporate gift aid payments to shelter profits from CT.
Please be aware that Government financial support during the coronavirus pandemic is changing regularly and the above is based on our current understanding.