Is 100% of club hut Covid grant surplus taxable?

Due to Covid grants, the taxability of all rental income on a club hut has raised it's head again.

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Does anyone have any experience of club rental surpluses being taxed? The subject has been mentioned before at: https://www.accountingweb.co.uk/any-answers/clubs-rental-income-corporat...

The query I was asked, was what happens about corporation tax now that a Covid grant has created a surplus? I pondered the percentage split between members and non-member rentals, only to realise that it was probably not applicable, rental income not being a mutual trade. I have trawled through the guidance, legislation, case law and spoken to the advice line but much advice out there i,e to clubs, seems to ignore the fact that rental income does not qualify as mutual. With clubs normally just covering their property costs, reinvesting surpluses, HMRC seem happy to treat them as dormant. So what happens now, with Covid grants creating surpluses, taxed in the CTAP in which they are received?

Is changing the year end, to match the grant with losses and expenditure even an option if necessary?

Replies (6)

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John Toon
By John Toon
09th Mar 2021 13:17

I'm going to make a big assumption here but the phrase "club huts" is something I've only generally seen in the mountaineering club world. If that's the case I'd raise with the BMC or whichever governing body your club is affiliated to.

This has been discussed before and if I've read the link to the legislation properly you'd split the grants received between mutual and non-mutual trading. If you've still made a profit tax would be due, assuming there were no losses to offset (for which most clubs won't have the necessary records)... https://www.accountingweb.co.uk/any-answers/ps10k-small-business-grant-m...

Final issue will be then choosing whether or not to notify HMRC as many sports clubs, unless they have significant trading activity, are not registered for CT.

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By HeatherSimpson
10th Mar 2021 09:39

Thanks John, good point re losses which we should be able to check fairly easily due to good records.

I am rather hide-bound, being of the 'register and make dormant' school for any (voluntary) club work, so yes, registered with HMRC and treated as dormant.

I can't seem to make the leap from property income not being mutual trading income per the legislation, to it being a mutual trade as far as a club hut is concerned, unless it is treated as some sort of non-commercial FHL.

Guidance from the governing body is that no income from members is taxable in a non-CASC. However, the advice was also to match all costs against any taxable income. So maybe not a useful as I hoped.

So, I will go with the member/non-member split but if anyone can help with the 'why?' I may stop going round in circles.

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Replying to HeatherSimpson:
John Toon
By John Toon
10th Mar 2021 11:33

You didn't mention which governing body was consulted and I mentioned the BMC on the basis that from previous experience they seem to have their head in the sand over clubs' tax status and tend to adopt the "bloke down the pub" approach to advice on these matters. Others, for example, the RYA, BCU, RFU take "proper" paid advice and I tend to consult their club pages over thorny issues like this.

The club I'm treasurer of is a CASC so luckily for me I don't need to worry about the grant income as long as we don't breach the CASC limits. However, prior to getting CASC status my understanding was that property income to non-members was taxable but property income to members was not, as fell under mutual trading exemptions. This is long out of date, but it seems HMRC rarely, if ever, update their guidance on clubs, other than for VAT cases(!) but you could consult the manuals (I haven't and hope to never have to) https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim24000

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Replying to johnt27:
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By HeatherSimpson
11th Mar 2021 12:31

Thanks John,

I trawled all the legislation and manuals before I posted on AWeb. All say that property income is not mutual. I will try the larger governing bodies. It is rather a small, niche subject.

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Replying to HeatherSimpson:
John Toon
By John Toon
11th Mar 2021 12:49

Hi Heather - I tend to agree with you. Did a bit of googling after this!

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By HeatherSimpson
29th Mar 2021 12:44

With the help of johnt27, I believe that we have untangled the treatment between us. The Covid grants are related to business rates = FHLs = a trade by any other name. Hence mutual income from members.

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