Fundraising Events
Fundraising is an important area for clubs, as clubs will likely need to raise additional income.
Quite simply, regular fundraising events open to the public are likely to be seen as trading income and therefore taxable.
There is a specific tax exemption for members’ clubs along with charities and other voluntary organisations that hold certain fundraising events, where the profits are used for a charitable purpose or for the club’s own benefit and it is important to consider whether this applies.
There is a well-known tax case, where the Peterhead Branch of British Legion held weekly dances from June 1944 to June 1947 to raise money for the British Legion Remembrance Trust Fund and other charitable purposes.
Even so, because of the regularity and scale of the fundraising events, they were said to have been trading and as such, the profits were taxable.
This case also highlighted an important principle, known as the “Peterhead” Principle, for claiming expenditure on notional expenses e.g. notional wages, where volunteers have given their time for little or no cost.
This has the effect of greatly reducing taxable profits. On the other side of the scale, a one-off fête or carnival where the primary purpose is to raise money for the benefit of the club is not likely to be seen as taxable by HMRC.
It is important, therefore, to understand the rules in more detail, where your club is holding more that the occasional, one-off event to raise additional funds.
Sponsorship
Receipts from sponsorship are not part of the mutual trade and should therefore be included as income when calculating the taxable trade profits, unless the sponsorship is provided in a personal capacity by a member of the club (i.e. not by his company/partnership/business).
The sponsor would normally wish to be able to claim a tax deduction against their own tax liability for the provision of the sponsorship payment and so HMRC would expect to tax the receipt in the hands of the recipient.
A written sponsorship agreement is normally drawn up to state exactly what is being sponsored and what the sponsor can expect in return for the sponsorship payment i.e. advertising/publicity.
Donations
Gifts are not taxable. You must be sure that any donation is a gift given freely and not a trading receipt.
Please bear in mind that HMRC issue tax rebates to a registered charity or CASC on donations given under gift aid and this can be a valuable benefit.
These guidance notes provide details of corporation tax which are relevant to community rugby clubs. It is written in general terms and cannot be relied upon to cover specific situations. Clubs are reminded that they should therefore seek their own independent professional advice. The notes have been prepared by Jerroms Business Solutions Ltd and is correct to the best of their knowledge and belief at 30th June 2017.The author takes no responsibility for any consequence of a user or club placing reliance on this guidance.
