Tax payable on gifting cash to social club members?

Tax payable on gifting cash to social club...

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I am the treasurer of a small works social club. It is not of charitable status. All our members are being relocated to various parts of the company although the site is going to remain with a few new personnel brought in. We have a few physical assets that we intend to leave to the new people, namely gym equipment and TV, Hifi etc so we aren't exactly closing down our social club just passing it on.

For the last 5 years our income is from subscriptions and a tuck shop and outgoings on maintaining a recreation room and a gym. However we have a largish sum of over £5000 built up from before over many years from social gatherings attended by both members and non members. We are proposing to have an EGM and distribute this money between the 25 members as a £200 gift. Collectively a dozen are electing to book a trip away with the money so a receipt detailing a kind of leaving do may be available for some.

Our employers are unhappy with this and insist we leave the money or donate to charity.

Are there any foreseeable issues or tax implications with this?

Thank you

Replies (6)

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By Helen Crowley
31st Oct 2012 14:27

Constitution

Do you have a Constitution? A well written one will guide you in these circumstances. A cash gift is likely to be taxable "By virtue of employment" as you suggest it's tied to your employment. Simplest thing is to spend it on the club whether its new assets, party, or trip or donate to charity.

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By UK Tax
31st Oct 2012 15:15

we aren't closing down our social club just passing it on

Think that says it all -

In the absence of closure, when no doubt specific rules would apply to dealing with any surplus (as supplemented by any other relevant law - Industrial & Provident Societies??), the constitution should lay down what the purpose is and if something falls within that purpose, then it's probably OK. 

Spare a thought also for any ex-employee members, who may have contributed just as much to the surplus as the current 25 who just want to divi up the booty.  The employer has probably also supported the club at some stage, hence their concern at just blowing it all. 

The committee members may find they have personal liability.

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By pmcx9
31st Oct 2012 17:00

thank you
Thanks both for your advice.
I haven't the constitution at hand but it is probably from a generic template for social clubs. However I do recall there is a procedure for closing the club but nothing regarding gifting members. I imagine the aims of the constitution would be to provide adequate sports and recreational facilities. Gifting £200 would be stretching that definition I suspect.

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By zebaa
31st Oct 2012 20:48

Distribute tax free

This looks to me like a simple, straightforward, club. As such it is owned by its members. If the membership wish to take all, some or very little from the cash reserve then it is up to them. You do not pay tax on your own money, so it's tax free. While the constitution may have something to say on a distribution if the current membership want to change that constitution they, of course, may. This assumes you are able to generate the required percentage of votes, but if you can no part of the constitution is off limits including the aims which could be changed too. When all this fun and games is over all members must have been treated equally.

Non-members or past members do not come into things, which brings me on the the employer.

Unless the company is a member of some sort the views of its management are neither here nor there. That said, telling your boss to 'get stuffed' may be unwise, so you may wish to give some thought to how this may be worded.

As an aside, if there is £5000 in the pot and this has been generated by trading which is not mutual (...built up from before over many years from social gatherings attended by both members and non members...) then tax may have been - or still is - due on this.

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By pmcx9
31st Oct 2012 21:52

constitution
Zebaa. Many thanks. You have summed up succinctly what I suspected to be the case. We have always gifted £50 to members for weddings, births and retirements. I would now assume that these are also eligible for tax. Is there any level of gift which is not subject to tax? Would the individuals be responsible for declaring their gifts or the employers or myself?

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By zebaa
01st Nov 2012 16:58

no tax on small gifts to members -

I think you are unlikely to have any problems with a gift of £50 which occurs maybe 3 or 4 times in a members lifetime & in the instances you describe. If you would like more detail follow the link below:

http://www.hmrc.gov.uk/manuals/eimanual/eim01460.htm

There is no tax on small gifts to members - don't forget that because it is a club it is the members property anyway - but employees are different. You can follow the link above to give more detail if some of this money has come to the club by way of gift from the employer. In this latter case tax may be due at the stage the club receives the gift, with the obligation on the employer to do the tax correctly, though each person, rather than the club, has an obligation too. But don't sweat the small stuff.

My guess is the employer may have made a gift or gifts over the years but omitted to include it in any paye return as they would need an up to date membership list to do so. As the amount is likely to be small it should not give cause for concern. My further guess is that the clubs financial records become somewhat vague as you go back a year or two also.

If this is the situation I suggest the proposal to dissolve the club, distribute funds to members & make a donation of equipment to a new club, is a good one. 

 

 

 

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