Finance Bill (except clauses 4, 5, 20, 28, 57 to 77, 86, 111 and 282 to 289, and schedules 1, 3, 11, 12, 21 and 37 to 39) – in a Public Bill Committee at 3:45 pm on 13th May 2004.
It would be churlish not to welcome the clause, because it is a relaxation for the clubs.
I am not sure whether I should address this question to the hon. Gentleman or to you, Mr. McWilliam. I am the patron of Hanwell Town football club, a darts team and the sadly now redundant Viaduct public house marbles team. [Hon. Members: ''He's lost his marbles.''] I have, in fact, lost my marbles team, rather than my marbles. Should not we all declare the amateur sports clubs with which we are associated?
As usual, Mr. McWilliam, you bring an element of sobriety to these events that is welcome.
It would be churlish not to welcome the clause. Amateur clubs are important to all our constituencies. I wonder whether the Economic Secretary could clarify one or two matters. The clause proposes to increase the turnover exemptions from £15,000 to £30,000, and I wonder how much that will cost the Inland Revenue. Sporting clubs in my constituency with bars will find it pretty easy to exceed the £30,000 limit. It is a matter of interest to me exactly what the cost of that turnover measure will be.
One of the other reliefs in the clause relates to bank and building society interest. It repeats the bank and building society interest exemption. I take it—and I hope the Economic Secretary will agree—that bank and building society interest for such community amateur sports clubs is relieved of corporation tax and all other taxation. I would like to know—I should know this but I am afraid I do not—whether community amateur sports clubs can invest in gross interest yielding investments. Would all the interest from those investments be free of tax? I return to where I started. It is a welcome provision, but I wonder whether the Economic Secretary would be good enough to respond to the two specific points that I have raised.
I, too, have an interest to declare. I am not sure whether sheep judging qualifies as a competitive sport, but two
Sundays ago, I became a member of the Diss and District Stockmen's club and was able to pay my subscription with my winnings from the sheep judging category. Regrettably, I did not win breeding ewes, but came top in lambs for slaughter. It certainly seemed competitive at the time.
Like the hon. Member for Torridge and West Devon, I welcome this clause. It seems churlish not to. It expands the exemptions introduced by the Finance Act 2002. I want to amplify the point that he made. As the threshold is based on turnover not profit, it would be easy for any club—particularly one running a bar—to reach it. Indeed, when the hon. Member for Ealing, North (Mr. Pound) was running the London School of Economics students union, I think that he and his friends in the Labour club would have reached the turnover threshold in propping up the bar in a matter of weeks.
We were a not-for-profit company, but we did not start out that way. We believed that profit was normally explicable in terms of surplus value, and something to be abjured.
Of course, they would have had terrible problems if they were a trading company. The hon. Gentleman will be aware of the principle of Sharkey v. Werner, appropriating trading stock to own use.
It does not surprise me that something that the hon. Member for Ealing, North was involved in turned out not to be profitable.
The fact is that community amateur sports clubs—while they are plainly not, in all cases, charities, in many cases are, by definition, not charities, and in some cases are not eligible to apply to be charities—are widely understood to be essentially philanthropic ventures that play a vital role in promoting health and exercise and have other benefits such as social inclusion. They are not, in essence, about money raising for withdrawal by members or shareholders but money raising for the purpose of continuing their activities.
In that context, although the clause raises the threshold, given that it is a turnover threshold it does not look quite so generous. If experience shows that the threshold is too low for trading purposes for organisations that are genuinely amateur clubs, will the Government consider raising that threshold to £50,000? That would align it with the limit that is generally available to charities in respect of non-primary purpose trading.
Secondly, I ask about take-up. The hon. Member for Torridge and West Devon referred earlier to the potential cost to the Treasury. As at the end of November 2003, only 529 clubs—out of an estimated 150,000 such clubs in the UK—had registered as
community amateur sports clubs. I understand that the Central Council for Physical Recreation is responsible for promoting the scheme. One might doubt how successful it has been in doing that. One of the tax partners at Deloitte and Touche put it thus:
''It is a problem of getting the message from the Gordon Brown level to the level of Joe Smith who runs the village cricket club.''
Will the Economic Secretary expand on how the Government plan to improve the take-up of what is, in essence, a worthwhile scheme?
This has been a useful short debate. I think that it has demonstrated how wide are the associations that members of the Committee have with local and community sports organisations and how wide the range is of the sports that they are associated with.
From tomorrow evening, I hope to be forging a long association with Upper Haugh cricket club, where I hope that our nine-year-old son will take up the opportunity to start training and possibly even succeed in making the under-11 team for future matches.
Clause 56 extends the relief from corporation tax on trading and property income enjoyed by sports clubs registered with the Inland Revenue as community amateur sports clubs. In the Finance Act 2002, we introduced a broad package of reliefs for CASCs similar to the reliefs available to charities. It included gift aid on donations by individuals and corporation tax reliefs for the clubs themselves. The package was widely welcomed.
We continue to seek to improve the scheme where it is sensible to do so and last year introduced legislation to provide mandatory business rates relief of 80 per cent. for registered CASCs in England and Wales from 1 April 2004.
With this measure, we are doubling the corporation tax thresholds for registered CASCs. That means that CASCs will be exempt from corporation tax on profits derived from trading if their trading turnover is under £30,000 a year, and from corporation tax on profits derived from property if their gross property income is under £20,000.
The hon. Member for Torridge and West Devon asked about the cost—
I understand the question. The hon. Gentleman asked about cost of the way in which we score tax. In our judgment, the cost counts as negligible—it is under £5 million a year. He expressed concern that the trading exemption may be too low. That probably will not be the case. Much of the income of most clubs is derived from their members. It lacks the required level of commerciality to be treated as trading income. The exemption threshold applies only to income derived from non-members and income derived from members that has a commercial nature.
If the clubs in the hon. Gentleman's area have bar takings that push them comfortably over the £30,000 threshold, he has some successful and very vibrant local clubs, and I am very pleased to hear that, but generally CASCs do not have such bar takings.
By a quirk of the law on charities, which might be being remedied in the draft Charities Bill—I am ashamed to say that I have not got my head around the draft Charities Bill yet—sporting clubs, as the Economic Secretary knows, are not charities. If the cost is negligible in terms of public expenditure and tax forgone, will he consider being even more generous in next year's Budget? In order to ensure that they flourish, many clubs have bars and ancillary activities. Of course we are talking about trading income, if that is what people want to call it, but that money must be ploughed back into the club for the benefit of the community. The institutions are very worthy and I hope that the Economic Secretary will give the matter consideration for next year.
I am very happy to take that as an early 2005 Budget representation. If the hon. Member for South Norfolk (Mr. Bacon) will allow me, I will treat his argument for a £50,000 threshold in exactly the same way.
The hon. Gentleman asked for an update on the process of registration for CASCs. As far as anyone can estimate, there are probably more than 100,000 local sports clubs and associations. We estimate that between 30,000 and 40,000 are eligible for registration as CASCs. To date, 3,960 have applied for registration.
Under the clause, clubs are not treated as trading when their main activity is providing sporting and ancillary facilities to their members. Therefore, that income will not be taken into account in establishing whether a club has a trading income above the £30,000 threshold.
The majority of registered CASCs will pay no corporation tax, and will be removed from the annual cycle of completing tax returns. The clause is another valuable measure for grass-roots sport. I am pleased to say that it has backing on both sides of the House, and I commend it to the Committee.
I hoped that the Minister would answer my question about bank and building society interest. I should like to know—I apologise to the Committee, as I should already know this—whether CASCs can invest in gross interest-yielding investments in banks and building societies, and whether, if they do, all such bank and building society interest would escape taxation.
I am entirely satisfied with that response. Presumably, as with all such matters, any such letter will be circulated to all members of the Committee.
Question put and agreed to.
Clause 56 ordered to stand part of the Bill.
Clause 78 ordered to stand part of the Bill.