Tax is an issue for many sports clubs. Understanding what you need to know is the first step in making sure your sports club meets its obligations. If you don’t your club could be at financial risk.
Tax may be a daunting subject for many sports clubs but it’s one you cannot afford to ignore. A good starting point is to understand what are the different taxes that might be relevant for your club and why. As part of this, you should consider your club structure and check if it is the most suitable for your needs. You can then investigate the relevant areas further and seek financial help and advice as required.
There are lots of different types of tax. Typically the areas most relevant to sports clubs include:
Business rates, or more formally, National Non-Domestic Rates (NNDR), are payable by businesses, including sports clubs, on the property they occupy. Visit our business rates page to find out more.
If your club is a limited company or an unincorporated association that trades and makes a profit then you will need to file a corporation tax return and may need to pay corporation tax. Income from members (such as membership subscriptions, or bar income) where the club is not seeking to make a profit and any surplus is used for the members benefit is generally exempt from corporation tax under the “mutual trading” concept. Other income may be taxable including:
- Trading income from non-members (e.g. bar sales)
- Investment income (e.g. bank interest)
- Property income (e.g. rent received)
- Chargeable gains (e.g. on the sale of land)
Income or gains may be offset by certain reliefs or allowable expenses. For further detailed information on corporation tax, visit the GOV UK website. Some National Governing Bodies also provide more detailed information relevant to their sport.
PAYE and NIC
Pay As You Earn (PAYE) is the system that HM Revenue & Customs (HMRC) uses to collect Income Tax and National Insurance contributions (NICs) from employees’ pay as they earn it. If your sports club has employees, you may have to deduct tax and NICs from their pay each pay period and may also have to pay Employer’s NICs (Class 1). Employers NIC is therefore an additional cost to the club. One of the most important issues for sports clubs is whether someone who your club engages (e.g. a coach) is a volunteer or works on an employed or self-employed basis. It is important to consider the “employment status” as it will have implications for tax and NICs. There are also legal issues including the national minimum wage and the rights of employees. This area can be complex, and there are a number of examples of sports clubs being fined by HMRC for failing to account for PAYE and NIC correctly.
- You will probably be aware of VAT from paying bills or buying goods. If your club is VAT registered then you will charge VAT when they supply certain goods and services, (known as taxable goods and services), in relation to business transaction
- For many clubs, VAT becomes a issue when they are considering a large capital project (e.g. a new club facility)
- It is a common misconception that once a club has registered for VAT it can reclaim all of the VAT on its purchases; this is rarely true
- It may be possible for some of the costs of the project to be exempt from VAT, or if not, for your club to recover a significant proportion of the VAT incurred if it is VAT registered. Each case depends upon the specific facts and circumstances of the club and its activities
- If you are planning, are in the process of undertaking or have recently completed a large capital project, you should seek professional VAT advice to ensure your treatment of the costs incurred is appropriate and you ensure the best position for your club
Sale of land
Some clubs may be in the position to raise funds (e.g. to fund improvements to their club facilities) by selling off land. If your club is considering this, remember there may well be tax implications, in particular VAT and corporation tax issues to consider. There are tax reliefs that may be available to reduce or defer some or all of any tax due, and you may be able to structure your club, for example as a charity or CASC in a way that makes you exempt from gains on the sale of assets. If this issue may affect your club then seek professional advice and explore whether your governing body can assist.
We have developed specific VAT Guidance to help sports clubs navigate this complex area of tax. This is particularly important if you are applying for grant funding for a capital project. To access the VAT guidance see the links in the 'Find out more' section.