CASCs and Outdoor Hospitality
The current UK Covid rules have brought an opportunity for CASCs with a bar and plenty of outside space to earn income by serving drinks outside.
With many traditional drinking establishments having limited outside space, this could mean that the club is accepting more social members than normal or is welcoming more non-members.
Could your club be at risk of breaking the CASC rules? Or could you club be exceeding the small trading exemptions for Corporation Tax relief?
It has been some years since the CASC rules changed, so now might be a good time to undertake a review of your activities to check that you still qualify.
Recap of the key HMRC CASC rules
In 2015 a number of changes were made to the CASC scheme. As reminder, set out below are some of the key rules:
- The club must be open to the whole community
- 50% of members must be participating in the sport
- CASCs can earn only income of up to £100k a year from non-member trading and property income (e.g. social membership fees, income from functions, bar sales, catering sales, rental income)
- Players can only be paid a total of £10k over a 12 month accounting period in total
- Restrictions on membership fees
Key Corporation Tax reliefs available from being a CASC:
- Trading profits if the turnover is less than £50k
- Property income where the income is less than £30k
- Interest received
- Chargeable gains
Other benefits from being a CASC:
- Claim Gift Aid on qualifying donations
- Mandatory 80% charitable rates relief
Risk 1 – 50% of the members are not participating in the sport
To be a participating member a person must participate in the sporting activities of the club on at least 12 separate days a year. Participating include volunteering to coach, officiating at games, or acting as a groundsman etc.
Risk: If your club has accepted a influx of social members, is the 50% rule still being met?
Recommendation: Review your membership lists.
You may need to consider having a “supporters club” separate from the CASC.
Risk 2 – earning non-member trading income of over £50k
Supplies made to members are not normally considered to be trading income. HMRC give the following examples around the sale of food and drink which fall under the member exemption. The sale of:
- Food and drink in a cafeteria to members of a multi-sports club as part of their participation in the sporting experience such as confectionery and snacks from a tuck shop to members of a gymnastics club as part of their gym session
- Drink to members of a club in the bar before, during and after games and training
- Food and drink to non-members in the bar after watching a game and being invited in for a drink by a member
- Food and drink to visiting players and spectators using the bar after a game when invited to do so by members
- Food and drink as part of a social event designed to encourage participation in the sport or to generate more regular sporting participation by club members
If non-members are just essentially using the club as a bar/restaurant, then the related income would be non-trading.
Risk: If total trading income exceeds £50k in an accounting period, the any profits arising on that income would be taxable. Furthermore, if trading income exceeds £100k the club would no longer meet the conditions of being a CASC.
With lockdowns only recently being eased probably unlikely that non-member income from bars, catering, vending machines, function etc have already exceeded £100k for your 12 month accounting period. However, at least in the short term it is likely that many people will want to reduce the risk of Covid by continuing to meet outside (especially as the summer is only around the corner). Therefore is it possible that you will exceed the £50k within your 12 month accounting period?
Recommendation: Forecast your trading income. Difficult to do in these uncertain times, however, it might be obvious from these workings the likelihood of the limit being breached.
If it is likely that the £50k limit will be exceeded you will need to take action to retain your CASC status. It is possible that setting up a trading subsidiary company, routing trading income through it and gifting profits to the CASC could be the solution.
Risk 3 – does the CASC need to register for VAT?
The rules for whether a CASC needs to register for VAT are the same as for any other business. In short, if a CASC makes taxable supplies of more than the registration threshold (currently £85k) it is required to register for VAT.
VAT rules are complex, but income from the following activities are examples of items that would count towards the £85k threshold.
- Social or non playing membership subscriptions
- Catering, bars, gaming machines and social functions
- Sponsorship income
Risk: Is increased income from social-memberships and catering/bars pushing the CASC over the VAT registration threshold?
Recommendation: Careful track your income for VAT purposes to ensure that you register for VAT at the appropriate time (unless you have voluntarily registered).
Covid has changed how the world operates. Now is a good time to review your trading activities and consider whether they may cause you tax issues or an issue with your CASC status. Early action now may mean that steps can be taken to prevent non-compliance or a tax liability.