Blogs/Vlogs

CASC VAT claim – an update

2 February 2017

Community Amateur Sports Clubs (CASCs) have now started to receive the VAT claims in relation to the HMRC v Bridport and West Dorset Golf Club Ltd case. The repayment was previously delayed while a decision was made over the amount of repayment to be paid to clubs that were not planning to reimburse past customers. This has now been resolved and claims, plus interest, are now being made from HMRC. For some clubs this will mean a significant windfall of ‘trading income’ all falling in one tax year - which could cause a few issues!

In order to be eligible for CASC status clubs must meet certain criteria (details of CASC criteria can found here). One of the criteria is that trading and property income from non-members does not exceed £100,000 in a year. For some CASCs, however, the VAT claim could mean that they breach this threshold for the year of receipt.

HMRC have given guidance that if a breach is made in one year then as long as steps are taken to correct the position going forward, CASC status will not be lost and, therefore, the benefits of being a CASC will remain, such as rates reliefs, tax exemptions and the potential availability of grant funding.

The repayment may also mean that a club breaches the trading income threshold for corporation tax exemptions.

CASCs with trading income under £50,000 are exempt from corporation tax on all trading profits, whereas CASCs with trading income over £50,000 will be liable to corporation tax on all of their trading profits. The VAT claim may push some clubs over this exemption threshold, therefore, clubs may find that they are liable to pay tax.

There is, however, some tax planning that could be done to reduce this tax liability. For example, a CASC may be able to establish and then utilise prior period trading losses which can be offset against the taxable trading profit and reduce their tax liability.

Clubs also need to ensure care is taken when calculating corporation tax, particularly in relation to dealing with the split of trading and non-trading income and then allocating costs appropriately to establish trading profits.

If you think the recent ruling may affect your CASC, please contact me or your local charity sector expert. Alternatively, if you would like to read more charity focused blogs please click here.

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