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Sports Club 'Compensation' Income Treatment

Any tax implications?

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I am a member of a sports club which has been established for a couple of decades. It is not a casc, a company, or has any formal structure. I have asked about deeds, etc and the oldest members don't think there are any. It is not VAT registered.

We meet at a local pub (we own nothing at the pub) and bring our own equipment. Unfortunately it is almost certain that the premises will be sold for housing development. This will involve us having to find new premises and as part of the sale of the property it has been suggested that our club may receive income to 'compensate' us having to move out and find new premises. The income could be in excess of £20,000 to help start up elsewhere, which is a very significant amount of money to the club.

My question is are there any potential tax consequences we ought to think about if this does happen and this money is received?

Replies (34)

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By WhichTyler
22nd Jun 2019 11:18

Worth getting a constitutions drawn up pronto, so you can be clear about (a) who is making the decision to accept the money and (b) what to do with it.

This will also help determine the tax treatment

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chips_at_mattersey
By Les Howard
22nd Jun 2019 15:04

From a VAT point of view the answer depends on the total income of the club. It is possible/likely that most income is VAT exempt. But the lack of documentation will weaken its argument if its total income is more than £83k.
Of course, if the income is well below £83k don't worry.

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RLI
By lionofludesch
22nd Jun 2019 16:37

It reminds me of the cricket club down south which had a massive influx in membership. A few months down the line, the new members had forced the winding up of the club, the sale of its ground for housing and the divvying up of the profits.

It might be worth spending a modest part of that £20,000 on producing a water-tight constitution, which includes a clause that any surplus funds on a winding up should go to a club (or clubs) with similar objects. Just to discourage any profiteers, like.

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Replying to lionofludesch:
Scalloway Castle
By scalloway
22nd Jun 2019 18:09

A clause that any surplus funds on a winding up should go to a club (or clubs) with similar objects may cause HMRC to decide that to club is not trading mutually and has to pay tax on its surplus.

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Replying to scalloway:
RLI
By lionofludesch
22nd Jun 2019 18:17

It's a common clause.

I would be surprised if HMRC took that point and I would resist it vigorously.

EDIT

https://www.gov.uk/government/publications/community-amateur-sports-club...

See clause 4. The instant case might not be a CASC but this is an indication of what HMRC expect from a constitution.

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By chicken farmer
23rd Jun 2019 08:44

From what you have said, the £20K to be received is not income. It is also not consideration for a supply, so no VAT. But CGT may be in point.

However there needs to be a disposal of an 'asset' which would include the disposal of a 'right' and you have not told us whether the club has any right to occupy part of the pub for its meetings or whether it is just an ad hoc arrangement. It could perhaps be that the £20K is simply a gift?

You clearly need professional advice on both the tax position and the apparent lack of a constitution.

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By Trewsiors
24th Jun 2019 15:35

I think chicken farmer the potential CGT issue is what I was wondering about. The £20k certainly exceeds annual membership fees and the annual accounts oscillate between a little profit and non profit as practically all of the funds are used in the course of the year with running the club.

A constitution is actually being looked into as we speak, and potentially (very likely) the set up of a new CASC as the club has grown over the last few years.

I suppose this raises another question in as much as if the monies were paid into a newly set up CASC, and they were deemed to be a gift from the outset, might they possibly qualify for Gift Aid in the hands of the CASC?

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Replying to Trewsiors:
RLI
By lionofludesch
24th Jun 2019 15:53

Trewsiors wrote:

I think chicken farmer the potential CGT issue is what I was wondering about.

Well, it's the Corporation Tax rules that you'd be looking at, rather than CGT.

You say it's compensation - are there any costs involved in this change of venue ?

You say it could be deemed a gift - there's your first problem. Is it compensation or a gift ? I'm not clear on why you need to be paid £20,000 to go away. What sort of sport is this ? One on the Sport England/Scotland/NornIron/Wales list ? Which country is it in ? Clearly, this "equipment" isn't installed at the premises as you say you bring it all with you. What hold do you have on your present premises ? Why can't you take the equipment to the pub across the road ?

Tell us a bit more and we may be able to give you more helpful advice. So far, you've told us next to bu99er all.

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Replying to lionofludesch:
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By Trewsiors
24th Jun 2019 16:13

Ok. What if it was a bowling club (crown green bowls) and the money would be used to set up new bowling greens on grounds that would require new bowling greens to be built? I think that would be the 'compensation' element, in order to have to relocate.

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Replying to Trewsiors:
RLI
By lionofludesch
24th Jun 2019 16:25

Trewsiors wrote:

Ok. What if it was a bowling club (crown green bowls) and the money would be used to set up new bowling greens on grounds that would require new bowling greens to be built? I think that would be the 'compensation' element, in order to have to relocate.

So is it a bowling club ?

Or am I being asked to pass an opinion on a purely hypothetical situation ?

When you said you brought your own equipment, that could've meant your own darts and board. A bowling green - especially a proper crown green - is something completely different. Why was that a secret ?

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Replying to lionofludesch:
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By Trewsiors
24th Jun 2019 16:33

It's all hypothetical because it hasn't happend yet, as mentioned in the question at the start. It isn't a secret, and looking back over my question perhaps I didn't provide enough information at the start of the thread.

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Replying to Trewsiors:
RLI
By lionofludesch
24th Jun 2019 16:46

No - clearly, there's a big difference between the costs of building a crown green and buying a new dart board from Sports Direct.

I've no idea what a crown green would cost but I'd say it's far more likely that the £20000 would be considered as compensation.

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By Trewsiors
24th Jun 2019 17:09

Still though, the question remains as to whether there are any tax implications of receiving this money as compensation to move to new premises. Would the club be free to spend it all on the move and the set up of new greens?

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Replying to Trewsiors:
RLI
By lionofludesch
24th Jun 2019 17:13

Yes - if you're going to spend it, there's no element of bounty.

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Replying to lionofludesch:
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By Tax Dragon
24th Jun 2019 17:18

Up to now I've just been enjoying the humour.

This logic floors me though. If you spend the money I give you, there's no bounty??!!

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Replying to Tax Dragon:
RLI
By lionofludesch
24th Jun 2019 17:23

Tax Dragon wrote:

This logic floors me though. If you spend the money I give you, there's no bounty??!!

Oh - you're giving me money ?

Very kind of you.

How much ?

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Replying to lionofludesch:
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By Tax Dragon
24th Jun 2019 18:20

A non-bounteous lump sum.

Not knowing how I can give you such a thing(*), I can't say how much it can be.

(*) Or are you claiming I owe you?

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Replying to Tax Dragon:
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By lionofludesch
24th Jun 2019 18:34

Tax Dragon wrote:

(*) Or are you claiming I owe you?

No - you said it was a gift.

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Replying to lionofludesch:
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By Tax Dragon
24th Jun 2019 19:17

And you said there was no bounty. I've reread it to make sure you did say what I thought you said. You did.

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Replying to Tax Dragon:
RLI
By lionofludesch
24th Jun 2019 19:25

Oh - chocolate as well ?

Today's been a good day.

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Replying to lionofludesch:
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By Tax Dragon
24th Jun 2019 19:43

What if there was?

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Replying to Tax Dragon:
RLI
By lionofludesch
24th Jun 2019 22:13

I dunno. You seem to be trying to say that if you give me money and chocolate, it's the same scenario as giving a bowling club compensation for future expenditure.

But it isn't, is it ? I don't have any anticipated expenditure and the money and chocolate seems to be some ill-advised attempt to bribe me into agreeing with you.

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Replying to lionofludesch:
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By Tax Dragon
24th Jun 2019 22:26

The question to me isn't what the club will do with the money, which is what you contend, but what asset it already has, that it will lose, which loss is deserving of compensation.

In short, I understand chicken farmer's questions, I don't understand your answers.

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Replying to Tax Dragon:
RLI
By lionofludesch
25th Jun 2019 09:41

The problem is that the OP's question simply raises more questions - which he is unable to answer.

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Replying to lionofludesch:
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By Tax Dragon
25th Jun 2019 10:03

Agreed.

That said, I'm struggling to think of any set of answers that would result in the receipt not being liable to CT.

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By chicken farmer
24th Jun 2019 17:37

For Pete's sake tell us what kind of club this is! And also what right,if any, the club has over the accommodation!

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By Trewsiors
24th Jun 2019 18:00

If you read the thread you will see it is a bowling club.

Let me rephrase the scenario and question to clear up any confusion:

" A 20 year old bowling club with 50 members operates out of a pub, making use of the pub greens. The membership fees cover the annual running costs, profit is generally nil. No other income apart from the memberships. Annual accounts are drawn up for the members. There are no deeds, constitution, etc as far as the oldest members are concerned and therefore probably no documented rights within the pub itself. A property development company purchases the pub and within the purchase may be providing a one-off financial payment of possibly £20,000 to assist the bowling club set up elsewhere.

Is this one-off income in any way taxable in the hands of the bowling club?"

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Replying to Trewsiors:
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By WhichTyler
25th Jun 2019 06:47

Does the club have to do/sign anything in order to receive the payment? Agree not to oppose planning application, waive any claim of rights over the land etc? Or just provide its bank details?

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Replying to Trewsiors:
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By chicken farmer
25th Jun 2019 10:29

No, if you read the thread you said "What if it was a bowling club" which is not telling us that it IS a bowling club.

You have still not told us what rights if any the club has that enable it to make use of the pub's bowling green. Until you give some kind of information about the current arrangements with the pub, no one can give you any guidance.

Getting information out of you is like extracting teeth. I'm out.

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Replying to chicken farmer:
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By Tax Dragon
25th Jun 2019 11:06

chicken farmer wrote:

Getting information out of you is like extracting teeth. I'm out.

That's my line! But I agree your sentiment entirely.

This though:

Trewsiors wrote:

A 20 year old bowling club with 50 members operates out of a pub, making use of the pub greens. The membership fees cover the annual running costs...

possibly tells us what's really going on. 20 years might be enough to have obtained some form of entitlement (legal point alert - I know even less about the law than I do about tax); else "running costs" includes maintenance of the greens (payment for the use of land, over a 20 year period maybe giving some other potential claim).

Either way, the compensation is to make sure the club goes away quietly into the night (it'll forfeit any potential claims). Consequently, it's CT-able.

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Replying to Tax Dragon:
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By WhichTyler
25th Jun 2019 13:46

Tax Dragon wrote:

Either way, the compensation is to make sure the club goes away quietly into the night (it'll forfeit any potential claims). Consequently, it's CT-able.

might not be! could be part of a s106/CIL requirement as part of a planning agreement, could be an unconditional donation, we just don't know...

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Replying to WhichTyler:
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By Tax Dragon
25th Jun 2019 14:48

I didn't know bowling clubs were eligible to receive s106/CIL payments, but I take your point. The OP though seems well capable of adding an "if" here and there.

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Replying to chicken farmer:
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By Dib
25th Jun 2019 16:12

I was brought up in a village that had a pub called "The Bowling Green" but it didn't have one.

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Replying to Dib:
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By lionofludesch
25th Jun 2019 16:38

The pub could be built on it.

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