HMRC have recently announced that they are starting the process of writing to registered CASCs to ask clubs to self assess whether they continue to qualify under the revised rules which were introduced with effect from 1 April 2015.
To briefly recap, the CASC rules are very beneficial for sports clubs because they provide mandatory reliefs from business rates, can provide corporation tax exemptions and can also enable clubs to claim Gift Aid on donations from individuals. The CASC rules are intended to provide a range of tax benefits which provide a funding boost to clubs across a broad range of sports.
However, the CASC rules were changed on 1 April 2015 and so now have additional criteria which will require many clubs who want to remain within the CASC scheme to alter either their membership packages, heir club structure, or potentially both.
What are HMRC doing now to check Clubs’ status?
HMRC have indicated that they are writing to CASCs in June/July 2015 to ask that the clubs “self assess” whether they meet the new rules and the self assessment will give the clubs three options:
1. If the club is confident that it still qualifies under the new conditions without need for action, then the club can complete the self-assessment checklist and return the checklist to HMRC.
2. If the club considers that it no longer qualifies under the new conditions then either,
(a) complete the self-assessment checklist and return it to HMRC indicating that the club does not wish to remain a CASC (and so the club will voluntarily deregister from CASC status) or;
(b) complete the self-assessment checklist and return it to HMRC explaining that the club does not meet the requirements to meet the new CASC rules but wishes to make changes to remain in the scheme. The club will need to then make the necessary changes before the 1 April 2016, after which HMRC will write to you to check that you have made the required changes.
Why is it important that clubs consider this letter carefully when it is received?
Firstly, the letter should not be ignored! The letter is giving the club a prompt that the CASC rules are beneficial and that clubs should seek to stay within the regime if possible. The additional business rates cost alone which would arise from ceasing to be a CASC can be substantial! However, if the club ignores the letter it will indicate to HMRC that the club will not meet the requirements from April 2016 (and so ignoring the letter may lead to a club being deregistered erroneously).
Secondly, the club should carefully consider whether they continue to meet the rules, but if the conclusion is that the new rules are not met, for what reasons? Typically where a club cannot meet the new rules this is due to having membership packages that do not meet the new requirements, having too much income from non-members, or not having enough “participating” members. In each of these scenarios the issues can normally be resolved by the club, for example by changing the clubs membership fee structure or creating a trading subsidiary.
The transitional period to April 2016 is intended to allow clubs to make the changes they need to qualify. As the CASC provisions are intended to help clubs, not hinder them, clubs should aim to stay within the rules if possible.
If your club has received a CASC self assessment letter from HMRC, we offer a no-obligation review process to enable you to understand how you should respond. If you would like a free review for your club, please contact firstname.lastname@example.org or email@example.com or call 0191 285 0321.