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Adopting charitable status may benefit your club, but it also brings with it additional requirements.
You will need to meet certain rules to be eligible to become a charity and meet ongoing annual reporting requirements.
Most clubs including those set up as unincorporated associations, companies limited by guarantee and community benefit societies can be charities. A CIC and non-charitable community benefit societies cannot be a charity but exist to benefit the wider community by trading to make a profit. As the name suggests, a Charitable Incorporated Organisation (CIO) must be a charity.
Setting up as a charity
In order to become a charity, a club must be able to demonstrate it is set up with aims that are charitable, and that these aims are carried out for the benefit of the public. This may mean the club has to update its constitution to include the charitable and public benefit purpose. If you set up your club as a charity and have income of more than £5,000 per year you must register with the Charity Commission. This doesn't apply to a charitable community benefit society which is registered by the FCA, with HMRC granting tax exemption. If the club has charitable purposes but intends to trade, for instance to sell tickets, merchandise, food or drink for a profit, it may have to consider a trading subsidiary. The Charities Commission has guidance to help clubs understand their obligations as a charity and what to do to meet these.
Advantages of charitable status
- Tax reliefs. Charities attract considerable tax advantages on charitable expenditure including trading profits, rental income, on profits if you sell an asset and when you buy property. A club will also benefit from 80% relief from Business Rates.
- Fundraising. People may view you differently as a charity. Charities often enjoy considerable support from funders and other potential supporters and can claim Gift Aid on donations. In addition charities can run certain fundraising activities that may be banned or require a license for non-charities.
Disadvantages of charitable status
- Status. Once registered as a charity a club cannot stop being a charity.
- Administration. Regulation by the Charity Commission can involve an additional administrative burden.