Feargal McCormack

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Feargal McCormack

• Community Amateur Sports Clubs (CASC) and
• UK VAT Tax Issues for GAA Clubs

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Community Amateur Sports Clubs (CASC) and UK VAT
Tax Issues for GAA Clubs
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• All GAA Clubs operating in the Six Counties come
  under the rules and regulations of UK Clubs and
  Societies, and they can be classed in 1 of 3
  categories for tax purposes, which are
• Registered as a Charity
• Registered as a Community Amateur Sports Club
  (CASC), or
• Have no special tax status
• The attachment at Appendix 1 outlines the
  comparisons in respect of each of these 3 options
  and the different tax aspects.
• In deciding which of the structures listed in the
  attachment would suit your club, will be
  dependent on the exact circumstances of your club
  and these must be looked at in great detail.

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Charity

• A Charity is a not for profit organisation. A
  GAA club is entitled to be registered as a
  Charity where the club and its constitution
  satisfy the conditions below
• It must be set up wholly to promote community
  participation in healthy recreation which
  includes promotion of amateur sport
• The club must be wholly charitable and open to
  the whole community without discrimination and be
  for public benefit, and
• A club wishing to register as a charity is not
  allowed to have a bar facility
• Registered Charities are exempt from
• Corporation tax on interest and trading income
• Corporation tax on income from property
• Capital gains tax on disposals of assets
  (Reinvestment is compulsory)
• Charities qualify for special VAT relief on the
  cost of a new building, which is to be used for
  charitable purposes (further discussed later)

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Community Amateur Sports Club (CASC)

• A CASC is a not for profit organisation that
  promotes amateur sports. A not for profit sports
  club will have many sources of income such as
  sponsorship, merchandising, gate receipts, bar
  takings rental and advertising revenue.
•  
• Any GAA club is entitled to be registered as a
  CASC where the club and its constitution satisfy
  the conditions below
• It is open to the whole community,
• It is organised on an amateur basis, and
• It has as its main purpose the provision of
  facilities for, and the promotion of
  participation in one or more eligible sports
•  
• Registered CASCS are exempt from
• Corporation tax on interest and income received
  under the gift aid scheme
• Corporation tax on any trading income up to
  30,000 in any 12 month accounting period - (If
  it is over 30,000 all income will be taxed at
  the normal corporation tax rate applicable)
• Corporation tax on income from property up to
  20,000 for a 12 month period (If the rental
  income is over 20,000 all the income will get
  charged at the normal corporation tax rate
  applicable)
• Capital gains tax on disposals of assets
  (Reinvestment is compulsory)

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Gifts to a CASC

• Donors can make gifts to a CASC and receive tax
  relief for categories of gifts including
• Donations under Gift Aid
• Gifts of trading stock under CTA 2009, s.105
• Gifts of assets at no gain no loss under TCGA
  1992, s. 257
• Gifts of plant or machinery under the CAA 2001,
  s.63(2) and
• Gifts by individuals on death or during life
  under IHTA 1984. s.23
• Any gifts or payments the CASC makes to other
  CASCs or to governing bodies of eligible sports
  will be treated as being made for a charitable
  purpose under IHTA 1984, s. 23 and to uphold the
  amateur status of the club (see above) (CTA 2010,
  s. 660 (6) and (7).

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No Special Status

• A GAA club that decides not to become a Charity
  or a CASC will fall under the normal rules for
  Clubs and Societies and
• They can run a bar
• They will pay corporation tax at the relevant
  rate on trading income, interest income and
  rental income
• They will pay capital gains on any sale of land
  and buildings and other assets and the profits
  from the sale after paying the capital gains can
  be distributed at the members discretion

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VAT Types of Income

• Firstly a club regardless of its status may
  register for VAT in respect of taxable supplies
  made. The following are examples of common
  income sources and the VAT status of same.
  Please note this is not an extensive list and is
  for guidance only.
• There are also other sources of income such as
  grants and donations which are outside the scope
  of VAT. Input VAT incurred on any expenses
  relating to this income may be reclaimable
  depending on the use of the income.

Standard Rated Zero Rated Exempt
Merchandising Gate receipts Bar takings Team jersey sponsorship Rental/perimeter advertising (if option to tax in place) Books Magazines Children's clothes Programmes Lottery Raffles Members subscriptions Rental/Perimeter advertising (if no option to tax in place)
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Partial Exemption

• Where a GAA club which is registered for VAT
  receives exempt income as well as taxable income,
  it is said to be partly exempt. This means it
  will not be allowed to recover all the VAT it
  incurs on expenditure. VAT on costs incurred
  directly in connection with an activity that
  generates taxable income (standard rated or zero
  rated) can be reclaimed but you cannot reclaim
  the VAT on any costs which are incurred directly
  in connection with an activity which will
  generate VAT exempt income, unless that element
  of VAT is below the de minimis rules.

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Minimising VAT

• It is possible to minimise the VAT burden by some
  of the following means
• Voluntary VAT registration where your taxable
  expenditure is high
• Avoiding liability on supplies by analysing
  supplies into their component parts and taking
  full advantage of zero rating
• Taking full advantage of the available exemptions
  identified in Categories of income
• Making the most of partial exemption by
  negotiating the best method of recovering input
  VAT with HMRC
• Timing output tax liability e.g. there will be a
  longer VAT cash flow benefit for an invoice
  issued at the beginning of a VAT quarter than at
  the end.
• Ensuring that VAT is charged where it is due,
  since, if you do not, you may be unable to
  recover VAT on corresponding costs

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VAT Treatment of Clubs and Societies

• One of the main issues that has emerged in the
  past few years, is the treatment of VAT under the
  three categories identified earlier.
• A misperception made by some clubs, is that as
  their club has registered as a CASC that they
  actually fall under the Charity Rules for VAT in
  respect of capital expenditure on new buildings,
  this is incorrect.
• A CASC is NOT A CHARITY and the VAT rules are
  different (see following slide).
• A CASC may register for VAT and then recover VAT
  in accordance with normal VAT Rules.

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Are CASCs Charities?

• A registered CASC cannot be recognised as a
  charity for tax purposes. However it is open to
  any sports club which is not a registered CASC to
  apply to the Charity Commissioners or other
  Charity Regulator to be registered as a charity
  as an alternative.
• Clubs proposing to seek charitable status should
  NOT apply for CASC status.
• Where HMRC are satisfied that a club is entitled
  to be registered they have no option but to
  register on receiving an application. Where for
  example a club makes an application to be a CASC
  having already been registered as a charity, HMRC
  would have to register the club if satisfied that
  it meets all the requirements of the CASC scheme.
  This would mean that the Club would no longer be
  entitled to be a charity under CA2006.
• (Source HMRC CASC detailed guidance notes)

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Capital Expenditure

• The Capital Goods Scheme (CGS) requires that
  adjustments must be made to the amount of VAT
  initially recovered on certain capital goods in
  order to reflect the differences in the taxable
  and exempt use of the capital goods over a period
  of time. The scheme only applies to, single
  items of computer equipment with a taxable value
  exceeding 50,000 and land or buildings
  transactions (e.g. purchase, construction or
  refurbishment) where the net cost exceeds
  250,000.
• The scheme would therefore apply to, for example,
  to club grounds and club house. In the case of
  land and buildings the CGS adjustments are to be
  made over a 10 year period. If the CGS item is
  sold within the specified adjustment period this
  could have adverse affects on the club

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VAT Relief for construction services for Charities

• A charity is entitled to a special VAT relief on
  the cost of a new building which is to be used
  for charitable purposes. There are conditions
  attached to the charitable use definition such
  as
• Used by all sections of the community
• A high degree of local community involvement
• Otherwise than in the course or furtherance of a
  business and/or
• as a village hall, or similarly, in providing
  social or recreational facilities for a local
  community
• If charitable conditions are met the charity
  provides the builder with a certificate and the
  builder will not charge VAT on his service. It
  should be noted the exemption from VAT applies
  only to those materials supplied and installed by
  the builder as part of his construction services.
• If charitable use of the building is less than
  95 the charity cannot issue a certificate to the
  builder, the builder must then charge VAT on the
  full costs. The charity would then need to enter
  negotiations with HMRC to agree the level of
  business use assuming the charity is VAT
  registered but some VAT will be suffered. An
  example is laid out on the next slide

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VAT Case Study for a Charity
  Building used 95 or more and Club is a Registered Charity   Building used less than 95 for Charitable purposes
Building cost 1,000,000   1,000,000
VAT percentage Zero Rated (0) 20  
VAT Chargeable to the Club Nil 200,000
As noted above the 200,000 will be the maximum
amount the charity may have to pay out, but the
club would need to look at the level of business
use and agree this with HMRC, to reclaim any
amount of VAT assuming they are VAT registered

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VAT Relief for Construction Services for a CASC

• A club which is registered as a CASC will always
  be charged VAT on construction works. The amount
  of VAT which can be recovered, depends on whether
  the club is VAT registered, and if yes, the
  amount of taxable supplies /use of building. An
  example is laid out in the next slide

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VAT Case Study for a CASC
  CASC registered for VAT CASC not registered for VAT  
Building cost 1,000,000   1,000,000
VAT percentage 20 20  
VAT Chargeable to the Club 200,000 200,000
If the club runs a bar or has other taxable
income sources amounting to 15 of income then at
least 15 of the VAT paid (30,000) will be able
to be reclaimed by the CASC If not VAT
registered, then the Club will have to pay all
the VAT and will not be able to reclaim any
amount
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VAT Relief for Construction Services for a Club
that has no Special Status

• A club which is not a Charity or a CASC will
  always be charged VAT on construction works. As
  with a CASC, the amount of VAT which can be
  recovered, depends on if the club is VAT
  registered, and if yes, the amount of taxable
  supplies/use of building. An example is laid out
  in the next slide

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VAT Case Study for Club with no Special Status
  Club registered for VAT Club not registered for VAT  
Building cost 1,000,000   1,000,000
VAT percentage 20 20  
VAT Chargeable to the Club 200,000 200,000
If the club runs a bar or has other taxable
income sources amounting to 15 of income then at
least 15 of VAT paid (30,000), will be able to
be reclaimed by the Club If not VAT registered
then they will have to pay all the VAT and not be
able to reclaim any amount
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Partial Exemption VAT Case Study

• Building Cost 1,000,000 net VAT 200,000
• Step 1 Income Sources
• Gate Receipts 1,500
• Merchandising 5,000
• Bar Takings 15,000
• Team Sponsorship 30,000
• Rental (no option) 3,000
• Membership 10,000
• Draw/Lotto 15,500
• Donation 20,000 Non Business
• 100,000
• Step 2 Non Business Calculation 20 Blocked
• Step 3 Partial Ex Calculation based on 160,000
  VAT
• Taxable Sources 51,500
• Taxable Exemp 80,000 x 100 64 of input tax
  reclaimable
• Therefore of the 200,000 VAT suffered this Club
  can reclaim 102,400

Taxable 51,500
Exempt 28,500
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Deregistration as a CASC

• Within Ulster, it is understood that there are
  over 100 GAA clubs that have registered as a
  CASC. Once the club has registered as a CASC
  they will always remain a CASC. Should the club
  be found not be adhering to CASC principles it
  could be de-registered by HMRC with a significant
  tax penalty. This means that the club is deemed
  to have sold its premises and immediately
  repurchased them at the current market value,
  whether this has taken place or not. The club
  would then be liable to pay capital gains tax on
  the deemed sale which could be maybe tens of
  thousands of pounds without having the cash to
  meet the liability.

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Planned Capital ExpenditureCASC versus Charity
Tax status

• If a club believes it meets the criteria of
  charitable status, then it should seek charitable
  status rather than CASC.
• Once registered as a CASC, a Club cannot register
  as charity, unless it is first deregistered as a
  CASC (a Club cannot deregister as a CASC, only
  HMRC can deregister a CASC).
• UK VAT, legislation specifically lists a CASC as
  a type of building NOT seen as similar to a
  Village Hall.

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Conclusion/Action Points

• If a GAA Club does not have a bar facility,
  consider applying for charitable status,
  especially if it intends incurring major capital
  spend on a new building (Remember the new
  building must qualify as a Village Hall type
  Building before proceeding).
• Give careful consideration before applying for
  CASC.
• Very complex VAT issues, always seek professional
  advice.