Community amateur sports clubs are an anomaly in the third sector. The CASC scheme was launched by HM Revenue & Customs in 2002, when amateur sports clubs were unable to register with the Charity Commission, to offer them tax breaks and access to Gift Aid. However, since 2006 amateur sports clubs have also been able to register with the commission - creating two separate options for clubs seeking potential tax relief.
Registration with the commission provides amateur sports clubs with a number of benefits, such as eligibility for payroll giving and gifts of shares. However, charity clubs cannot carry out social or trading activities, such as running a bar. Instead the activities have to be carried out by separate, non-charitable bodies, such as social clubs. In addition, clubs that register as charities must prove that they provide public benefit, a stipulation that many of them might not be able to meet.
By comparison, CASCs are often considered to be less strictly regulated than charities, while still receiving many of the same benefits. To register with the CASC scheme, clubs must demonstrate that they are open to the whole community, are organised on an amateur basis and promote participation in one or more of the 139 sports deemed eligible by HMRC.
Once registered, CASCs receive mandatory 80 per cent rates relief, although local authorities can offer 100 per cent at their discretion. CASCs can also claim Gift Aid on small donations and are exempt from corporation tax on profits from trading activities of less than £30,000 a year.
Despite the benefits that CASC status can offer, only 6,200 clubs are registered - a fraction of the 90,000 that the Sports and Recreation Alliance says are eligible. One deterrent to registration might be confusion about the complex registration process involved.
Changes to regulation
In order to address this, Sajid Javid, the Economic Secretary to the Treasury, recently announced plans for new legislation to "help existing and prospective clubs to be confident about what they need to do to qualify". These include changes to CASC regulation that appear to bring them closer to charities.
For example, Javid said there would be proposals for CASCs to make allowances for people on low or modest incomes, forcing some to change the way they work. He said the consultation would also explore a limit on the amount of income CASCs can generate from social and non-sporting activities. The consultation will examine how a CASC might separate the activity into a wholly-owned subsidiary company, once the amount raised exceeded the proposed limit.
Although it seems that HMRC's legislation will introduce more regulation for CASCs, some lawyers think this will make application and registration easier. They also point out that there will still be crucial differences between CASCs and charities.
One disbenefit for CASCs is that, unlike charities, they cannot claim Gift Aid on donations from a trading subsidiary and are therefore less tax-efficient. On the other hand, CASCs do not have to demonstrate public benefit and HMRC regulation is more 'light-touch' than the that of the commission. CASCs will also continue to be able to have social members, something not open to charities.
It is also argued that the proposed regulations for trading subsidiaries and the requirement for CASCs to provide allowances for people on low incomes will affect only those clubs with particularly high incomes and membership fees.