CASC Status - rule change

[damian]

Are the HMRC looking at "Caving" or Club Objectives?

HMRC Guidance states:

To be a participating member they must participate in the sporting activities of the club on a number of occasions that is equal to or more than the club?s participation threshold.

It then goes on to say:

Examples of ?participating in the sporting activities of the club? are:
    participating in an eligible sport organised by the club
    being a match official for an eligible sport for the club
    coaching club members in an eligible sport
    providing first aid to people playing an eligible sport for the club
    being an accompanying individual for the club
    driving a club vehicle, or a vehicle hired by the club, to transport those persons listed above
    preparing or maintaining club sporting facilities or equipment for use in an eligible sport
    being an officer, or a committee member of the club
    undertaking a relevant training course

 

[johntoon]

Club officials will have to make declarations on behalf of the club in annual returns, and the consequences of making a false return are - as ever - serious where tax is concerned, and ignorance will be no defence. Clubs will have a duty to make the appropriate enquiries of their members and make the returns on that basis.

There is no provision in the new CASC rules for HMRC to request annual returns from clubs. There is however an expectation that CASC registered clubs maintain some level of evidence, as there always has been, to ensure they meet the CASC rules now and in the future should HMRC ever investigate a club for compliance.

Since the CASC scheme came into being in 2002 there have been no investigations by HMRC into club's qualifying for CASC status.

 

[johntoon]

Thanks for the headache you've just given me Damian. That's the first I've heard of the changes and at minimum we'll have a few clauses to reword in our constitution to meet the new set of requirements. I'm sure I  sent a copy to HMRC when we registered in 2002, but it will certainly need changes to pass now. The anti-discrimination clause might trip us up. We introduced a minimum age because we didn't want to get involved in child protection legislation especially in a sport where minor injuries (eg bruises) would not be unexpected and could easily be interpreted as abuse. Any thoughts how to get round that in a HMRC acceptable way? We let members' children take part in activities provided a parent is present - is that acceptable provided we write it into our constitution?

It's unlikely that many clubs will have to make significant changes to their constitution as a result of the CASC changes. All club's registered prior to the rule changes in April this year should have suitable clauses that would satisfy the rules. The only exceptions would be those registered prior to 2004 when a minor amendment was made regarding u18s.

The model clauses required can be found here: https://www.gov.uk/government/publications/community-amateur-sports-clubs-detailed-guidance-notes/annex-5-model-clauses

Just because you have a clause in your constitution which prohibits discrimination and could permit u18s to join the club doesn't mean you will be inundated with membership requests. It is possible following a change in 2014 to have junior memberships without voting rights.

Finally on your point regarding child protection legislation if you permit u18s to attend club organised meets, even if they attend with their parents/guardians, you MUST have a Child Protection Officer appointed and comply with the relevant child protection legislation. This also means you need to consider the use of waivers for medical/first aid treatment, have details of next of kin should accidents happen and have permission for using images children for promotional purposes, if you do so.

 

[johntoon]

Which bring up the question of the many active cavers with memberships in several clubs. Will they report their total days per annum to all their clubs?

That's absolutely fascinating, and I think the honest answer is that HMRC wouldn't have a clue how to deal with that scenario. It's certainly arguable that if a person is a member of multiple clubs, as many are, then the qualifying activity pertains to them, the person, and this therefore transfers to any club they are a member of, rather than being pro rataed between several clubs.

The participation rules set out by HMRC are clear - they relate to club arranged activities only, so if your club has members who are more active with other clubs than with your own this will not count towards the 12 days (once a month) participation criteria.

Ironically, the government have announced a consultation about sports participation in the widest sense, because Sport England numbers show it is falling. It can be found here https://www.gov.uk/government/consultations/a-new-strategy-for-sport-consultation Within the consultation the government recognises that participation, particularly within clubs tends to be sporadic!

 

[johntoon]

Then there is a question about levels of membership, many clubs have Honorary members, are they counted?, groups like the CDG have a 'non-diving' membership, are they counted?

The participation rules are generally based on fee paying members. However, if club's have a large number of honorary/social members they should consider setting up a supporters club either separately constituted from the CASC or have a social membership within the club, as long as they don't breach the 50% rule. The RYA have some excellent guidance on this area http://www.rya.org.uk/newsevents/enewsletters/theclubroom/jul15/Pages/casc-rules-update.aspx

 

[johntoon]

As for children, this seems to be a particularly problematic area, as exclusion on age isn't allowed, but then enforced automatic CRB checks on all adult members is equally unacceptable.

CRB checks, or DBS checks as they are now known, are only required for meet leaders should you have u18s attending meets without a parent or legal guardian. If another member of the club took on this responsibility i.e. a friend of the family then a DBS would still not be required as long as a waiver was signed by the parent/legal guardian allowing the appointed guardian to look after their child, similar to signing your kids off on a school trip.

If a club permits children to attend meets then as previously stated on another post a CPO needs to be appointed - they should have a DBS check done. The cost is ?35 which is much better than breaking the law knowingly or not and the potential penalties etc which could be incurred.

 

[johntoon]

I've tried calling them several times today on their number 0300 123 1073 but have not been able to get through.

but I will try again tomorrow.

If anyone happens to get around to calling them before me...

My questions would have been around the issues of:
1) Does membership/ activity within a regional cave rescue organisation constitute club activities (as it raises the profile of the club)
2) Many members are members of a number of clubs, and as such there are blurred lines around which club their activities relate to. Is it enough just to use a log of all of the trips that they have been on (irrespective of what club)
3) Does Sitting on a regional caving body count (such as DCA, raising the profile of the club)

I would Ask 1 and 3 as these, I suppose, would be automatic qualification for the 12 trips a year (as membership of the caving clubs committee automatically gains the individual qualification for the criteria)

4) is asking a question on a clubs membership form "how many trips have you done in the last year?" enough?


Also one of our members raised a question about being thrown out of CASC for not complying. They suggested that in this instance the club would be liable for corporation tax on the property. however I am not so sure... I will need to do some digging.

5) around the issue of participation, does the participation have to be from within the club. Because many people visit our club when they come caving, either staying over or just a day trip into one of the local caves.
When they sign the book they are then known as resident members. do these count towards the overall clubs trip total?
Thereby without the existence of the club there would be x number of people not able to cave as easily as before.


As I Said before, I will try to call them this week, before I go on a caving trip to Sardinia (and the monthly meeting on Friday), If anyone else has any other questions they want to ask. please number them 6 onwards and I will do my best to ask them when I call HMRC tomorrow.

Don't bother calling HMRC they won't give you advice over the phone. It's better to put things in writing but HMRC aren't in the advice game unfortunately.

In answer to your other questions please see below:
1) No - as this relates to the rescue organisation
2) See my other post on participation rules but in essence if they don't participate with your club but another one it doesn't count
3) No - same as 1
4) Yes it is enough and is one of the suggested methods of compliance issued by HMRC.

If a club does lose CASC status they will potentially have a corporation tax liability to pay, as well as claw back of Gift Aid and rates relief, however in the transitional period that ends in March 2016 this is waived.

5) Participation relates to club members. That doesn't mean you couldn't recognise resident members as members too - but they would have to participate 12 times a year otherwise it would make the situation worse.

 

[johntoon]

Is this another example of how caving loses out because it is a rare non-competitive sport? If a club is set up in a competitive sport, it should be pretty easy to see who is active and who is not, because, presumably, records are kept of competitions, matches, tournaments, races etc  etc.

It is recognised that the rules are somewhat slanted towards competitive team sports, but then the NGBs of these sports are the largest in the country and can pay for appropriate legal and accounting advice for them and their members. If you review the respondents to the consultation in 2014 regarding the rule changes most of the NGBs listed were for either team sports or so called upper middle class sports type clubs i.e. golf, sailing etc.

However, the rule changes do significantly impact some of the clubs listed above particularly when you look at the caps on participation costs and membership fees and rules on participation levels, where for example your local rugby club may have two playing teams but a membership of 200 (most of whom prop up the bar on match day).

 

[johntoon]

Re: being thrown out as a CASC
If you end your CASC, you will presumably wish to set up a new club in the form of a charity and pass on your hut. You will in effect be selling your club's assets on to a another organisation (i.e. the charity you set up to replace the CASC) and should, therefore, be subject to Corporation Tax. However there is an exemption specifically relating to these new requirements. If you write to HMRC before 1 April 2016 explaining you no longer meet the requirements, then as I understand it you are exempted Corporation Tax.

Having read the notes here:

https://www.gov.uk/government/publications/community-amateur-sports-clubs-detailed-guidance-notes/community-amateur-sports-clubs-detailed-guidance-notes#leaving-the-scheme

it seems this exemption only applies if you transfer to become a charity. Even if you opt to become a charity, presumably stamp duty will be due, as well as the other legal costs associated with any significant property transfer.

Apparently you cannot just opt out of the scheme: you have to show that you are no longer able to meet the requirements for being a CASC, and I doubt HMRC will be prepared to accept that on the basis of "our members can't be arsed with your rules on demonstrating participation". Furthermore, if you are able to show that you are not a CASC then presumably HMRC can come after you for repayment of the benefits which you've had by being treated as a CASC in the period for which you did not qualify.

What may not be clear to some is that if the rules are applied as they appear to be described in the above link then if you do de-register, corporation tax will be chargeable on the value of the property which is transferred from the 'old' club to the 'new' one (presumably less any demonstrable acquisition costs). This could potentially run into a six figure sum for some of our larger clubs who have owned huts in desirable rural locations for decades.

The above is incorrect.

There is currently an amnesty period running from April 2015 until March 2016 for clubs to asses whether or not they meet the new CASC rules or can adapt their current arrangements to maintain compliance.

If currently registered CASC clubs do not feel they can comply with the new rules then the notification to HMRC will be accepted without challenge and without tax penalty.

The transfer of a CASC to a charity is irrelevant and somewhat misleading and would probably be wholly inappropriate for most clubs due to the additional administrative burden and oversight this would entail. Bear in mind CASC status is a privileged taxation status hence the need to apply and the rules. Charitable status is a change in legal status upon which any club considering it should take professional advice.

 

[johntoon]

Firstly, many thanks to Damian for flagging up this most important change in legislation!  My club is a CASC and knew nothing about this and have not received any information sent to us officially.

Orpheus C. C. was encouraged to become a CASC by Derbyshire County Council when the option was first available because it allowed them to claim back from HM government the 80% rate rebate they gave the Club on our HQ.  Prior to this we were given a 100% rate rebate anyway (as were many other sports clubs in Derbyshire) but DCC footed the bill for this themselves.  In fact we still have a 100% rate rebate but DCC only has to cover 20% of that, the government covers the rest.  From memory, I believe the sum for OCC would be around ?3,000 per annum if we had to pay full rates because the figure is always quoted on our rates form every year, and then there is the bit which says we have the rebate.

Before we set this up and made the necessary changes to our constitution we consulted the HMRC office in Derby and explained exactly what the club was and what its HQ was.  We went ahead only after making the necessary changes to ensure that we complied with the rules as they were then.  If they have now changed the rules or added some new rules so that we can no longer comply, they presumably must have this in mind in giving a period of grace during which we can withdraw from the system with no penalty.  It would mean we would in future have to pay rates in full (unless DCC went back to allowing a discretionary rebate) but I can think of no other advantage we have currently which we would lose.

I assume this will also hit mountaineering clubs with Huts in Lakes as well - does it also apply to Scotland and Snowdonia or is this an "English" problem.  (Sorry, currently abroad with dodgy internet so no chance to study the various websites quoted.)  It would be worth checking with BMC how they are going to tackle this because it will affect far more of their people as there must be hundreds of club huts belonging to climbing and mountaineering clubs.

The other point is that this is surely aimed at those large sports clubs (rugby clubs, golf, clubs and the like) which own a club house or pavilion with a bar and sometimes  restaurant (often open to the general public) and also own a substantial piece of land with a "pitch", training facilities, golf course, etc.  AFAIK this situation doesn't apply to caving or climbing club huts which are effectively "hostels", having the sole purpose of providing accommodation for members (and guests) who take part in an outdoor pursuit which can only take place in certain geographical areas and for which members living outside such areas of country may have to travel considerable distances to be able to take part.  In fact our club premises is classed as a "hostel" under local planning regulations and we have had to comply with various rules about what we were able to do in the way of building works because of related safety issues.

Someone mentioned the "law of unintended consequences" and it seems like this legislative change is a case of someone up top not going in for joined up thinking!

The rule changes were proposed in 2013 and a lengthy consultation period was held. All NGBs and interested parties were invited to comment, but as mentioned on another post many NGBs let the opportunity slip by. The rules affect all CASCs located within the EU.

HMRC along with local authorities have written to all CASC registered clubs notifying them of the changes and the first tranche of letters targeted those clubs most at risk of not complying with the new rules. The letters are being sent to whoever is the main contact on HMRC's records, if this is a long since retired treasurer or they have moved house without notifying HMRC, for example, then the letter will have gone astray.

This isn't a big issue for BMC clubs. There are only 3 CASC registered mountaineering clubs affiliated to the BMC, of which I am treasurer to one of them. I also provide advice and support to the BMC on such matters.

If CASC registered clubs are only making use of the 80% rates relief they are losing out some of the other significant benefits - Gift Aid, opportunities to generate non taxable income through trading, commercial sponsorship, discounts offered by organisations that will only deal with charities or CASCs.

 

[johntoon]

Our club has looked at this already and had decided that we could assume that the percentage of members who were "active" was in line with those who had asked us as part of their membership subscription to register them as "Cavers" for PL insurance as opposed to "Non-Cavers"

Would that assumption be correct?

No

The participation rules relate to the overall club membership. At least 50% of members must participate in club activities once a month.

 

[johntoon]

Hello Damian
Are the HMRC looking at "Caving" or Club Objectives?
One club's objectives (as accepted by HMRC) are stated as -
"The main objects of the Club shall be to provide facilities for and to promote participation in the amateur sport of caving and related pursuits in the Yorkshire Dales."
One suspects "related pursuits" would include a raft-load of non-caving activities.
And to "to provide facilities for and to promote participation in" does this include a monthly visit to the club hut or accessing the club website?

Now I cease to wonder why taxation lawyers earn huge amounts of money.

HMRC are not looking at club objectives in the slightest, in fact the rule changes on mandatory constitutional rules that are required have changed very little as a result of the announced changes.

The changes to the CASC scheme are set out to target the perceived abuse of the scheme by large, discriminatory clubs who had, for example, a large social membership (which in HMRC's eyes mean they should be mutual societies) or membership fees which prevented those less well off from joining (think golf clubs).

The reference in your constitution to related pursuits does not mean you are a multisport club - that's a whole different ball game! It just means you can organise a climbing meet or walking meet or similar in the Yorkshire Dales and without precluding your club from the scheme.

 

[nickwilliams]

johntoon,

Thank you for taking the time to provide your valuable insight.

I note you are involved with BMC. Has your interest in this topic here come about as a result of the message I sent to Dan Middleton last week?

Please feel free to contact me by e-mail at nick-dot-williams-at-hucklow-dot-net if you think that's more appropriate/convenient.

Kind regards

Nick.

 

[johntoon]

Hi Nick,

I stumbled over the topic due to a google alert (I don't get out much!)

I know Dan at the BMC although he looks after clubs on the East side of the Pennines...

I'm happy to answer questions on the forum or direct - treasurer-at-lancsmc-dot-org

 

[johntoon]

Hi all,

Just to summarise what the CASC rule changes are here's a quick run down:

The changes (from HMRC website)

As a CASC you won?t pay tax on:
?trading profits if your turnover is less than ?50,000 a year (?30,000 before 1 April 2015)
?income of up to ?30,000 a year from renting out property (?20,000 before 1 April 2015)

Income condition (backdated to April 2010)

There?s no longer a limit on the amount of trading income you can earn from members. The new income condition means that CASCs can?t earn more than ?100,000 a year from:
?trading with non-members
?property income

Payments to players - irrelevant for non competitive clubs

CASCs can pay players as long as they don?t pay more than ?10,000 in total to all their players in a single year.

Membership costs - unlikely to impact most caving or climbing clubs but beware sporting activity costs may be problematic if you undertake niche sports (cave diving for example)

There are new limits on fees and costs associated with membership:
?Fees can?t be more than ?31 a week (?1,612 a year)
?If your club?s membership fees and sporting activity costs are more than ?10 a week you must provide help, for example a discount to reduce those costs to ?10 a week for people who can?t pay more.

Expenses - unlikely to be of relevance to non competitive clubs

Clubs can pay expenses for some matches and tours where players take part in and promote the club?s sport.

Participation - the biggie!

At least 50% of a club?s members must participate in sport at the club.

My preferred solution to this question is to poll members on their participation activities. Bear in mind it must cover club organised activities, but these extend over and above the meets on the meets card, and can cover impromptu meets arranged by members as well. Participation also covers all the other things mentioned previously committee meetings, AGMs, maintenance meets...

I have also written a blog on the topic https://www.linkedin.com/pulse/community-amateur-sports-club-john-toon

Unfortunately the BMC, BCC and other "smaller" NGBs have little or no guidance in this area. So the best thing to do is cherry pick from the "good ones" - the BCU, RYA, RFU, FA, LTA all have comprehensive guidance on the CASC changes.

 

[damian]

johntoon, thanks for taking the trouble to comment.

The transfer of a CASC to a charity is irrelevant and somewhat misleading and would probably be wholly inappropriate for most clubs due to the additional administrative burden and oversight this would entail.

This implies that your understanding is that a deregistering club (within the exemption period) can simply return to existing as it did before taking on CASC status, rather than - as I had taken the rules to mean - that deregistration equates to the end of the club and, therefore, a compulsary transfer of assets to another CASC or Charity. If this is correct, then that is very interesting, but can I ask what you have read that makes you think this?

 

[peterk]

In looking for the reasons behind the changes I found this document http://www.agco.org.uk/s921hw71h91j/wp-content/uploads/2013/08/AGCO-CASC-submission-12-08-2013.pdf. It is a submission by independent golf course owners detailing the tax arrangements of CASC golf clubs. The money passing through CASC golf clubs is staggering. A few quotes:

the supposedly non-profit making members? clubs include Sunningdale Golf Club, taking some ?1.3 million of visitors? fees in 2011 to subsidise the subscriptions of their wealthy members

Non-profit making includes the Berkshire Golf Club, taking some ?12 million of visitors fees since 1996 (roughly ?800,000 a year) and being described as nonprofit making. It includes Walton Heath Golf Club in Surrey with visitors? fees each year in excess of ?600,000 ? still classified as non-profit making

(Huddersfield GC) m. The annual subscriptions were ?473,711. Their green fees were ?82,124. The club operates the usual scam of recording these as ?temporary members? to fudge the figures. The surplus on the bar was ?32,784 and the surplus on food was ?25,706
The green fees were ?82,124 and the allowable expenses ?34,734. And that gives a taxable profit of ?47,390. Yes ? that?s taxable profit. What do Huddersfield record? Absolutely nothing! No tax paid. In fact they, like the Berkshire and the other members? club with the same scam, suggest they make a loss on visitors? fees.

I think it is reasonable to assume caving clubs will be at the bottom of any HMRC CASC hit list (and HMRC are starting another round of job cuts)

 

[johntoon]

johntoon, thanks for taking the trouble to comment.

The transfer of a CASC to a charity is irrelevant and somewhat misleading and would probably be wholly inappropriate for most clubs due to the additional administrative burden and oversight this would entail.

This implies that your understanding is that a deregistering club (within the exemption period) can simply return to existing as it did before taking on CASC status, rather than - as I had taken the rules to mean - that deregistration equates to the end of the club and, therefore, a compulsary transfer of assets to another CASC or Charity. If this is correct, then that is very interesting, but can I ask what you have read that makes you think this?

Hi Damien,

Yes a club that de-registers during the embargo period will simply revert back to it's original status ie without the benefit of the CASC special tax provisions. Think of like lifting a veil from the club...

This is a one off opportunity as there is in effect no legal right for a club to simply relinquish from CASC status and I think this is where the confusion lies.

The CASC rules imply a "sporting asset lock" which essentially means that should a club cease for whatever reason then the club's assets must be transferred either to another CASC or to a charity as this maintains the "asset lock" and prevents clubs gaining a tax advantage, say on the sale of property, and then exiting the scheme

 

[johntoon]

In looking for the reasons behind the changes I found this document http://www.agco.org.uk/s921hw71h91j/wp-content/uploads/2013/08/AGCO-CASC-submission-12-08-2013.pdf. It is a submission by independent golf course owners detailing the tax arrangements of CASC golf clubs. The money passing through CASC golf clubs is staggering. A few quotes:

the supposedly non-profit making members? clubs include Sunningdale Golf Club, taking some ?1.3 million of visitors? fees in 2011 to subsidise the subscriptions of their wealthy members

Non-profit making includes the Berkshire Golf Club, taking some ?12 million of visitors fees since 1996 (roughly ?800,000 a year) and being described as nonprofit making. It includes Walton Heath Golf Club in Surrey with visitors? fees each year in excess of ?600,000 ? still classified as non-profit making

(Huddersfield GC) m. The annual subscriptions were ?473,711. Their green fees were ?82,124. The club operates the usual scam of recording these as ?temporary members? to fudge the figures. The surplus on the bar was ?32,784 and the surplus on food was ?25,706
The green fees were ?82,124 and the allowable expenses ?34,734. And that gives a taxable profit of ?47,390. Yes ? that?s taxable profit. What do Huddersfield record? Absolutely nothing! No tax paid. In fact they, like the Berkshire and the other members? club with the same scam, suggest they make a loss on visitors? fees.

I think it is reasonable to assume caving clubs will be at the bottom of any HMRC CASC hit list (and HMRC are starting another round of job cuts)

I wouldn't worry too much about AGCO - they are the UKIP/BNP of the golf world hence their poorly worded CASC response. The clubs they mention except Huddersfield aren't CASC registered and never would have been due to their membership criteria not being open to all. The AGCO also moan about VAT in their submission - this was down to the UK government, some 20 years ago, misapplying EU rules (VAT is an EU tax) and many clubs both CASC registered or AGCO members and not have received significant windfalls as result of overcharging the general public

That's not to say there hasn't been abuse or misunderstandings of the rules but politicians write the rules and don't understand taxation or law and their competency in this area is continually lacking. I have dealt with a CASC registered Golf Club in the past that mistakenly thought the trading income limits of ?30,000 related to profit not income and had to pay tax arrears when it was discovered.

I've also dealt with CASC registered clubs who weren't taking proper advantage of the allowances available, for example, by restructuring membership fees so that Gift Aid can be claimed on them. There are also thousands of sports clubs who haven't joined the scheme because bar-room lawyers and accountants have spread misinformation or misunderstood the rules. Things such as "we'll lose control of the club and it's property" or "we'll be inundated with under 18's and can't cope with the child protection laws if we become open to all" are extremely common reasons for not considering CASC status - all of which are complete nonsense.

 

[damian]

Yes a club that de-registers during the embargo period will simply revert back to it's original status ie without the benefit of the CASC special tax provisions. Think of like lifting a veil from the club...

Thanks for your reply. I accept this is one possible interpretation of the guidance and rules, but wonder if you have anything to confirm it is the actual intention of HMRC, such as a document or experience of it happening.