Case Study 5: Sports and Social Clubs (CASC) Monthly Fee: £50

The Client: Karate Club

Status: Company
Turnover: £12,000 per annum
Directors: 1
Staff: None

Service provided by MAAP

MAAP Fee: £50 per month
Monthly: Prepare payroll
Quarterly: Write up books
Annually Company accounts & CT600 tax

Summary

Every night and most weekends many of us engage in a sport, perhaps a hobby, or simply a social event all brought about by the efforts of a small number of un-sung heroes who organise it all for our benefit. It therefore comes as quite a shock to those very same organisers to discover two very unpleasant facts of life they may never have even thought about before.

The first is that if your sports or social club makes a net surplus that would generate £100 or more of tax a year, you are legally obliged to register with the HMRC as you now fall within the scope of the Corporation Tax regulations.

The second point is that unless you have taken out adequate insurance policies, or incorporated, the organisers … and for that matter, every member … is jointly and severally liable for any claims made for injuries or losses sustained as a result of operating your club or association.

You may think your sports or social club is far too insignificant for these two factors to apply. Think again.

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Don´t ignore the possibility of an uninsured claim against you

We have personal experience of mediating a serious injury claim against one of our smaller sports club clients in 2102 that resulted in a five figure payout as compensation to the injured party. The fact that everyone agreed that there was no fault and no way of foreseeing or avoiding the accident, didn´t stop the claim from proceeding. If our client hadn´t been insured, the claim would have meant he would have had to either re-mortgage or even sell his family home to settle the amount involved. These things can, and take our word for it, do happen more often than you might think.

If you operate any kind of sports club or social association, we would strongly recommend you carry, at the very least, a third party, all risks, insurance policy. If the activity you are involved in includes any kind of physical activity, then we would also recommend personal accident cover as well. The combined insurance policy for a small club can often amount to over £650 a year, but the consequences of not being insured could cost you everything you own.

If you operate any kind of club or social association, we can advise you on how to mitigate the risks of being sued if the worst happens. Many clubs and associations now either incorporate as a straight forward limited company, or as a Company Limited by Guarantee for just this very reason. As a company, any claims can only take the assets of the company, not your own.

We are the first to admit the risks we are discussing here are small, but that is not the same as non-existent.

During 2012 two separate claims came to our attention involving legal action taken against small sports clubs. It may sound like scare mongering, but the reality of running any kind of club or association uninsured and as an unincorporated association means you, and every one of your members, have put every asset you each own on the line. In a world where litigation is becoming more common, operating this way is not one we would personally undertake in any circumstances, and it is not the way we recommend you continue.

And please don´t make the mistake of believing that just because you are organising an event for a group of friends the risks become any less. As sad as it may seem, no matter how worthy or well intentioned your involvement may be, if someone suffers a loss or injury as a result of an event your club has organised, you expose yourself to the risk of being sued. Some people may have the personal integrity to accept it was just an accident and decide not to pursue a claim. Others won´t, and once solicitors become involved, you will just see the legal costs you have to meet go through the roof, even if the claim subsequently proves unsuccessful.

If we have said enough to worry you, than that is good news. We have probably alerted you to a risk you have never perceived as applying to you before, and if you act to minimise that exposure then the time we have spent writing these few paragraphs will have been worthwhile.

Registering with the HMRC

If your association generates a surplus of income over expenditure of more than £500 (tax £100) a year the HMRC can fine you for not registering with them when you should.

Fortunately, common sense tends to rule the day here. There are options you can take advantage of that will end up with you paying little or no tax at all. The outcome depends on whether you operate to make a profit or not, and the content of your written constitution (Yes, you do need one!).

For example, if your annual surpluses are consistently below £500 and you operate on a ‘not for profit’ basis, you can come to an arrangement with the HMRC where they will record your club as dormant. You won´t have to prepare detailed accounting records and submit a CT600 tax return to the HMRC every year. They will just contact you every five years to confirm the situation remains the same.

If you club makes a healthy surplus each year, and you still operate on a ‘not for profit’ basis, you can register with the HMRC as a ‘Community Amateur Sports Club’ (CASC). This effectively shelters your surpluses from Corporation Tax so long as you stick to the rules.

If you operate your club and take the surplus for yourself, no matter how small it is, you fall under the Corporation Tax rules and should register with the HMRC, submit a CT600 return every year and pay the 20% tax due within nine months and one day of the year end.

We can understand why some people want to throw in the towel after discovering they should be paying tax on the meager surpluses their club generates. The idea of incorporating or paying an accountant to submit their returns to the HMRC won´t help either. The truth of the matter is that you really do need to talk to us if you make more than £500 a year and you haven´t yet registered with the HMRC.

Call Ralph Elliott-King on 01202 482121 to discuss how we can help you reorganise the way you run your sports or social club a little more safely and take advantage of the tax breaks the HMRC allow for such organisations.

  • We can advise a club if it should incorporate and then organise for it to happen.
  • We can provide all the schedules you need to record income and expenditure.
  • We collect in the records every quarter and write up the accounts to the necessary HMRC standards.
  • We can operate a monthly payroll for you if required.
  • We deal with the online filing of monthly payroll returns as well preparing the annual returns each year.
  • We are available to advise on all accounting, payroll and management issues.
  • At the end of the year we collate the information we have already processed to produce the required accounts and CT600 Corporation Tax return for filing with the HMRC (and Companies House if incorporated).
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MAAP Accountants
Sigma House, 44 Willow Way
Christchurch, Dorset, BH23 1LA
Tel: 01202 482121
info@maap.co.uk