10 April 2015
At the end of March HMRC published the long awaited detailed guidance which accompanies the Community Amateur Sports Clubs Regulations 2015 and the amendments which were brought into the CASC tax legislation within the Corporation Tax Act 2010. The changes to the CASC regime have been publicised as a simplification and clarification aimed at enhancing the reliefs afforded to sports clubs and making the regime more widely available. Indeed the Olympic legacy was much referred to in the consultation and the discussion leading up to implementation of the changes.
A read of the new rules, though, tells rather a different story.
Cricket clubs may be upset to see HMRC’s example on discrimination preventing the main pitch being reserved for the club’s first team, and requiring that the lower and more junior teams are also given access to it. Indeed clubs are prevented from any form of discrimination, even to the extent there may not be a requirement that prospective member’s have any level of ability in the club’s chosen sport. And the requirements as to affordable membership options for those with limited financial means will wreak havoc with the likes of golf clubs, whose typically higher membership fees reflect the relatively higher costs of maintaining a good quality course.
Whilst the changes take effect on 1 April 2015, those clubs which are already registered as CASCs and have previously fully complied with the ‘old’ rules will have a 12 month period of grace within which to tow the new line. Those that remain uncompliant at 1 April 2016 face being deregistered from the scheme at the hands of HMRC, although presumably only having first alerted HMRC to their own non compliance. After all, just imagine how long it would take HMRC to notice the non compliance otherwise, and then imagine the fiscal and administrative headaches which would ensue if HMRC discover the failings 5 years down the line and look to impose a backdated effective deregistration.
Under the old rules and the new, CASC status has always been seen as a forever choice, with no option for a club to voluntarily de-register. Deregistration has therefore only ever been at the mercy of HMRC and on the occasion of the club ceasing to meet the CASC criteria. And as a sting in the tale deregistration brings with it a deemed disposal and re-acquisition of the club’s assets for capital gains tax purposes, translating into a capital gains tax charge on the club calculated as if the club’s assets had been sold at market value upon de-registration.
Presenting the CASC regulations to the First Delegated Legislation Committee of the House of Commons on 2 March 2015 the Exchequer Secretary to the Treasury noted that “HMRC would waive any deregistration charge that would be due, provided that the club has been fully compliant with the existing guidance and there is no other reason for seeking to deregister the club” but so far I have found no mention of this exemption from a capital gains tax charge on deregistration either in HMRC’s detailed guidance (which acknowledges the charge at section 6.1.3 ) or in the regulations or the core legislation.
So a quick straw poll – how many clubs who are considering de-registration as the only realistic reaction to the new rules would be willing to risk a tax charge without HMRC or the Treasury committing the exemption into law?
If you would like to discuss the details of this blog post further, please contact Graham Boar from our Letchworth office or a tax adviser at your nearest location. Alternatively, you can complete our online contact form.