Liability of an undeclared club?

Liability of an undeclared club?

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As a bookkeeper (fully ICB registered), I've been approached by a Club to take over their 'treasurer' function.

Examining the records, which go back to 1998, I have established that the Club is not registered with HMRC as a "unincorporated organisation".

A loss was made in the previous financial year, but profits have been made in the preceding 6 years, and there is a 5-figure bank balance which must have been generated from past profits since the Club's formation about 35 years ago.

What should I do about registering them?  If I complete a CT41G(Clubs), and HMRC query the discrepancy between the 'formation date' and 'date that first accounts will be prepared', surely they will be liable for back-tax PLUS fines? 

I can present accounts for the last 13 years (I have the records), but does that help?

Please can someone help?  Professionally I feel obliged to turn this Club down as a Client, as working for them 'under HMRC's radar' is professionally untenable.

If I convince them of the need to be ON the radar, what's the worst that can happen financially?  How reasonable are HMRC to a defence of 'load of oldies meeting together to enjoy a shared interest and to whom tax liability never occurred'?

Replies (9)

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the sea otter
By memyself-eye
22nd Feb 2014 19:12

Answer - nothing.

You are being paranoid.

Your last paragraph explains all

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Replying to DJKL:
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By CatherineR5
24th Feb 2014 11:34

Don't understand..?

Thanks, memyself-eye, but my last paragraph:

"If I convince them of the need to be ON the radar, what's the worst that can happen financially?  How reasonable are HMRC to a defence of 'load of oldies meeting together to enjoy a shared interest and to whom tax liability never occurred'?"

was a question, and is not an explanation of anything.

 

Were you implying that HMRC WILL be reasonable?

I don't feel I am being "paranoid".  I feel I am taking due care and ensuring that my client is given best advice.

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By DMGbus
22nd Feb 2014 21:17

It depends..

A mutual trading club (where all the profits are derived from its members) has no CT to pay on such profits.

However profits earned from non members (eg. rents, bank interest, capital gains) are liable to CT.

There is a de minimus level where HMRC are happy to exempt a club from making CT returns, from memory it is where the would-be CT liability is less than £ 100.

 

 

 

 

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Replying to Manchester_man:
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By CatherineR5
24th Feb 2014 11:42

CT liability ...

Thank-you - your terminology lead me to this:

http://www.hmrc.gov.uk/manuals/bimmanual/bim24000.htm

So income from sales of regalia, profit of ticket sales over costs for events (which are open to members only), sale of refreshments etc would be exempt from CT.

The only income I can see which might be liable to CT then, is a tiny amount of bank interest (which has unsurprisingly dried up).

So I shall complete a CT41G(Clubs), enter the formation dates and accounts dates exactly as per, and if HMRC raise a query about 'delayed registration', show them accounts which indicate (perfectly accurately) that all income is derived from members. 

 

Thank-you. Properly helpful.

 

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Replying to stephenward69:
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By mims101
26th Feb 2014 01:20

Can you let me know how this goes?  One of the clubs I have a contract with has a turnover of about £58'000 - ALL from members and virtually no profit so I am told... anything left over goes to maintenance of equipment and buying new things to replace old.  I guess that is why no one thought to register with HMRC but I am still surprised as the Treasurer is an accountant!  I am not the treasurer, chairman or secretary but I fear that these are the people who will be in trouble ... could I just suggest they replace the chairman and treasurer with new people so the new people can start a fresh like you are???

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By Malcolm McFarlin
24th Feb 2014 12:12

VAT registration

Is the club VAT registered? Some clubs do not think they should register for VAT as they don't make a profit

Malcolm McFarlin

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By mims101
26th Feb 2014 01:06

Legality?

Are there any other implications or consequences to this other than the requirement to pay any tax due and the relevant fines?

I have a similar problem.  Don't want to get anyone in trouble at all but the club want to operate a PAYE scheme so they will HAVE to register with HMRC!

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By CatherineR5
02nd Apr 2014 15:51

Brief update:

Malcolm McFarlin: no, the Club is not VAT registered, nor does it need to be as Turnover is well under the threshold.

 

Mims101: I am about to prepare a clear paper outlining what the Club has to do to resolve this problem, and before I will confirm my contract with them.  Assuming they're in agreement I will send in the CT41G, brace myself for the HMRC questions and let you know how it goes.

If the Club is not in agreement to this approach, then they're on their own!!

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By dkaccounant
30th Jun 2016 11:12

Hi Catherine

how did your club get on with this situation. I have the same problem and would like to know whats happened.

many thanks

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