New Clause 7 — Taxation of community amateur sports clubs

Orders of the Day — Finance Bill — [1st Allotted Day] – in the House of Commons at 10:00 pm on 3rd July 2002.

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'. After section 508 of the Taxes Act 1988 insert—

"Community amateur sports clubs

508ZA (1) Where—

(a) a club which has as its object the promotion within the community of amateur sport, physical education or the provision of sports facilities is approved for the purposes of this section by the Secretary of State; and

(b) the memorandum of association or other similar instrument regulating the functions of the club precludes the direct or indirect payment or transfer to any of its members of any of its income or property by way of dividend, gift, division, bonus or otherwise howsoever by way of profit;

there shall, on a claim in that behalf to the Board, be allowed in the case of the club such exemption from tax as falls to be allowed under section 505 in the case of a charity the whole income of which is applied to charitable purposes.

(2) The condition specified in paragraph (b) of subsection (1) above shall not be deemed not to be complied with in the case of any club by reason only that the memorandum or other similar instrument regulating its functions does not prevent the payment to its members of reasonable remuneration for goods, labour or power supplied, or for services rendered, of reasonable interest for money lent, or for reasonable rent for any premises.

(3) The Secretary of State may by regulations made by statutory instrument specify those classes of amateur sport, physical education and the provision of sports facilities to which the provisions of this section shall apply.".'.—[Mr. Flight.]

Brought up, and read the First time.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

I beg to move, That the clause be read a Second time.

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

With this it will be convenient to discuss the following amendments: No. 5, in schedule 18, page 242, leave out from beginning of line 24 to the end of line 37 on page 243 and insert—

'4 Section 505 of the Taxes Act 1988 (charities: general) applies to registered clubs and qualifying purposes as it does to charities and charitable purposes.

5 Section 25(10) of the Finance Act 1990 (c. 29) (gift aid) applies to a registered club in respect of any gift received by it as it applies to a charity in receipt of any qualifying donation.'.

No. 6, in page 243, leave out from beginning of line 42 to end of line 5 on page 245.

No. 7, in page 245, leave out lines 7 to 31 and insert—

'9 In respect of all gifts and transfers to a registered club, which for the purposes of this Schedule include membership fees, the donor may make such claims and elections as would be available under any enactment if that registered club were a charity.'.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

For some time there has been cross-party support for the view that qualifying amateur sports clubs should either be able to qualify as charities or to have a tax relief parallel to charities. What has happened is a dog's breakfast in that last November, the Charity Commission decided that some amateur sports clubs could qualify on the basis of contribution to health and fitness, but others could not. Consequently, angling, crossbow, flying, motor sports, pistol shooting and various others do not qualify. The Government had made certain promises, going back to the last election, on tax reliefs for qualifying amateur sports clubs, not expecting them to qualify as charities, and those are introduced by the Bill. However, they are slightly less generous than those which would obtain if an amateur sports club became a charity.

The duties of charitable status are not hugely onerous, but they entail work, and some smaller clubs that would qualify as charities may not want to make the effort to become a charity. In essence, the new clause states that it is ridiculous to have two sets of slightly different rules when the amounts of money are not material, and suggests that it would be more sensible for qualifying amateur sports clubs to enjoy the same tax reliefs as charities.

Under the Revenue rules in the Bill, gifting is permitted only from individuals, not companies. There will be misunderstandings about that and rows about claims. There are differences in the rules for trading income and stamp duty. Above all, there could be a difference in rates. Before the election, the Government suggested that they expected to put in place measures that would give 80 per cent. relief. They cannot be part of the Bill because they are not financial, but the figure was miraculously reduced to 50 per cent. That is important for many amateur sports clubs.

The cost of the relevant provisions is £5 million—not a huge sum. The modest, small new clause would tidy up the Bill. Amendments Nos. 5, 6 and 7 would allow membership fees to qualify for gift aid on an equal basis with charities. Is there a material difference between membership of a qualifying, virtuous sports club, which makes people healthy and saves the national health service money and membership of Save the Whale? We believe that it would be sensible for all membership fees to qualify.

We raised the issue in Committee and discussed various aspects of it. However, the fundamental point was not tackled. We hope that the Government have had second thoughts. Instead of making everything even more complex, let us have a clean, simple arrangement.

Photo of Edward Davey Edward Davey Shadow Spokesperson (Office of the Deputy Prime Minister), Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Office of the Deputy Prime Minister)

I support the new clause. The relevant issues were debated in Committee, when my hon. Friend Dr. Pugh put our position on the record. The matter was discussed in two sittings and I therefore do not wish to detain the House at length. The Government have offered sports clubs a choice between the route set out in the Charity Commissioners' recent ruling and the provision in the Bill. That is a welcome improvement, but as the hon. Member for Arundel and South Downs suggested, it creates some untidiness and means that the decision is difficult.

People who do not have much expertise in the matter because their core aim is to run a sports club, with all the attendant benefits for communities throughout the country, are being asked to make difficult decisions. Should they decide to become a charity, with the various duties, responsibilities and possible change in the club's ethos that that entails and get the available reliefs? Or should they go down the route that the Government propose, and obtain slightly different reliefs? It is a complicated decision. It is therefore not sensible simply to say that it is wonderful that sports clubs have a choice. It would be better to align the choices so that they are identical for tax purposes.

The new clause is sensible and I believe that the Government would agree with its spirit. Perhaps they wish that they had thought of it. The Economic Secretary is unlikely to accept the new clause, but I hope that he will show that the Treasury is open minded and that we can look forward in due course to changes that the Government have drafted.

Photo of John Greenway John Greenway Conservative, Ryedale

It is often the way in the House that, if there is something that an hon. Member has wanted to talk about for a long time, they only get the opportunity to do so very late at night, when they have no wish to detain the House unnecessarily. I do, however, want to speak to the new clause and the associated amendments.

There are 110,000 community and amateur sports clubs in this country. They are run by volunteers, and they provide the biggest resource to grass-roots sport participation in the entire United Kingdom. As my hon. Friend Mr. Flight said, in last year's Budget, the Chancellor of the Exchequer proposed the introduction of a tax package, and Ministers in both the Treasury and the Department for Culture, Media and Sport heightened expectations that that package would include mandatory rate relief.

That perception was encouraged at the general election. I well recall, two days before polling day, an argumentative joint interview with Kate Hoey—then the Minister for Sport—not about whether the Government wanted to provide mandatory rate relief but about how that should be done. The sense that mandatory rate relief was the Government's plan was, therefore, certainly heightened at the election.

When the Government were about to publish their White Paper on this tax package, however, the Charity Commissioners produced a rabbit out of the hat by suggesting that they were prepared to amend their definition of "social purposes" so as to include many of these sports clubs. Ministers have been very enthusiastic that charitable status would deliver mandatory rate relief—as, indeed, it would. We find, however, that the mandatory rate relief proposal has been dropped from the Treasury's own tax package. Yet, on the very day that the White Paper was published—30 November—the Treasury issued a press release that stated that its tax package would include 80 per cent. mandatory rate relief. I take that as an indication that this idea was dropped at the last minute, because there was an alternative route.

My hon. Friend the Member for Arundel and South Downs and Mr. Davey have made the point that this is not a popular choice for those who run the many amateur sports clubs to have to make. They are volunteers, this is a complex matter, and they cannot understand why Ministers are saying, "Yes, we think you should have mandatory rate relief, but you can only have it by going down the charitable route. You can't have it through our tax package." That shows a very strange sense of priorities.

For that reason, my hon. Friend the Member for Arundel and South Downs felt it sensible to raise this issue in Committee and on the Floor of the House. Where is the logic in saying, "You can have mandatory rate relief by one route, but not by the other"? That is subject, of course, to the caveat that the purposes of the club must be clearly defined, and relief restricted to genuine community and amateur sports clubs.

Earlier today, here at the Palace of Westminster, the Central Council of Physical Recreation launched its latest initiative on the value to health of sports participation. Those colleagues who attended the launch were told that the Government spend £1,100 per capita on health, but only £1.34 on sport, and any sensible interpretation of a written answer that I received from the Secretary of State for Culture, Media and Sport last week would be that half that £1.34 is spent on administration and regional bodies.

Nobody in the House can be proud of this situation. It is time to begin to redress the balance of priorities. At the most recent Department for Culture, Media and Sport Question Time, the Minister for Sport said that the Government were looking to see how they could extend their relief to provide this rate relief, but I would say to the House that it really is time to give these community and amateur sports clubs the support that they deserve. I urge hon. Members on both sides of the House to do what their constituents, and the sports clubs in their constituencies, want, which is to vote for this measure.

Photo of John Healey John Healey The Economic Secretary to the Treasury

I welcome the cross-party support expressed by the hon. Members for Arundel and South Downs (Mr. Flight) and for Kingston and Surbiton (Mr. Davey) for the general increase in support for community and amateur sports clubs.

The provisions that the Government, together with the Charity Commission, have put in place offer the scope for local sports clubs to become charities if they choose and if they are eligible, and they offer significant support for clubs that are not able or not willing to become a charity. What the hon. Member for Arundel and South Downs proposes does not tidy up the provisions that the Government propose; it does not reduce the complexity; and it does not reduce the inequity that the hon. Gentleman thinks he sees in what we are proposing. I shall explain why in a moment.

Mr. Greenway said that he had wanted to speak about these matters for a long time. Indeed, he has a long-standing interest in local sports and is heavily involved in his local area. I know of his activities and I know the area well, and the hon. Gentleman spoke knowledgeably on the subject.

On business rate relief, that was not part of the tax package that was the subject of the consultation that led to the provisions in the Bill. Discretionary rate relief, as the hon. Gentleman rightly points out, is a matter for local authorities. The Office of the Deputy Prime Minister has issued a consultation paper on revising the guidance on rate relief for charities and other non-profit-making bodies. The aim is to provide a more consistent basis for and approach to decision making in local authorities on these matters. The issue that the hon. Gentleman raises is a matter for the Office of the Deputy Prime Minister, not for a Finance Bill. The measures contained in the Bill and in the tax package are generous by any measure and they are widely welcomed.

New clause 7, as the hon. Member for Arundel and South Downs briefly explained, seeks to extend all the exemptions that charities enjoy on their income to clubs which have as their object the promotion within the community of amateur sport, physical education or the provision of sports facilities. The Opposition claim that the new clause would give sports clubs parity with charity, which clubs have sought, as least as regards the exemptions on their income.

Clubs can already achieve parity by becoming charities, following the Charity Commission's decision to relax its approach, announced alongside the pre-Budget report in November last year. If a sports club wants to be treated as a charity, it can now be treated as a charity, and it should become a charity.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs 10:30 pm, 3rd July 2002

I thank the Minister for allowing me to intervene. My understanding, as I mentioned, is that the Charity Commission has made it clear that not all amateur sports clubs can become charities. They must be able to meet the Charity Commissioners' designation of health and fitness. I read out an illustrative list showing that there are various kinds of amateur sports clubs that would qualify for the measures in the Bill, but cannot become charities.

Photo of John Healey John Healey The Economic Secretary to the Treasury

The hon. Gentleman is perfectly right. The broadening of the definition of charitable purposes that the Charity Commission confirmed in November last year included two activities that it will now recognise as charitable: first,

"the promotion of community participation in healthy recreation by the provision of facilities for the playing of particular sports" and secondly,

"the advancement of the physical education of young people not undergoing formal education".

That leaves certain sports which Sport England would recognise as a sport, such as angling, pool, billiards and snooker, outside the definition. Hence, we are bringing in tax provisions in the Bill so that clubs that cannot qualify as a charity may nevertheless benefit to a significant extent from the support that we want to put in place to back their activities.

Amendment No. 5 would give sports clubs access to all the reliefs that charities enjoy on various sources of income, including the right to reclaim tax on payments made under gift aid. Amendment No. 6 would remove the restriction of reliefs where a sports club spends its funds on non-qualifying purposes—that is, not in providing facilities for or promoting participation in an eligible sport.

Amendment No. 7 would give donors to sports clubs access to all the incentives that donors to charities enjoy. It would also allow members of sports clubs to use gift aid for their membership fees. That is not charity parity, but charity plus, and it is not justified.

It would be misconceived to allow any organisation not prepared to meet the requirements or the responsibilities of becoming a charity to enjoy the full range of exemptions available to charities. It is not our intention to put community and amateur sports clubs in a better position than charities or other businesses.

Furthermore, including membership subscriptions in the gift aid scheme would not be appropriate. Gift aid is intended to increase the value of gifts to charity by allowing taxpayers to add to their donation the basic rate of tax that they have paid. It is not meant to subsidise the payments that people make to purchase their use of leisure and sporting facilities.

The principal purpose of the provision in the Bill is to support local sports clubs, which pay an important role in all our communities. Every Member could cite a number of local clubs in their constituency that could benefit from this support. They play such an important role that we want to support them. In my own area, next door to where we live in Rawmarsh, is the Upper Haugh cricket club and the St. Joseph's junior football club. Those clubs allow people to participate in sport, and are run by people who give up their time willingly and voluntarily, and have often done so for many years. This is the first time that the Government are putting in place through the tax system support and recognition for their contribution to their communities.

Our proposals, as set out in clause 57 and schedule 18, provide alternative support for clubs that cannot or do not want to become registered charities. We received more than 2,500 responses to the consultation. The sector told us that it wanted a scheme with less regulatory requirements than the Charity Commission that was administered by the Inland Revenue. That is what they have got. If clubs meet the criteria in schedule 18, they will be able to enjoy most of the reliefs and exemptions usually associated with charitable status, including many reliefs for donors. The package is targeted in particular at helping the smallest sports clubs without triggering the level of regulation required of charities.

I shall show the strength of support for this provision. After the proposals were first set out in the pre-Budget report in November last year, Elsa Davies, director of the National Playing Fields Association, said in December:

"We have criticised the Government in the past for its record on supporting sport . . . and we had begun to believe that this change was unattainable, but the Charity Commissioners and the Treasury have provided a magnificent Christmas present for sport."

In response to the Budget on 17 April, the chairman of the Central Council of Physical Recreation said:

"This is a great day for British sport. We are delighted that Government is listening to the views of sport, and is recognising its contribution to society through the tax system."

The new clause would introduce a more complicated regime, not a tidier one. It would require the Secretary of State to decide what activities should qualify for this relief, and to set up additional procedures for approving individual clubs. It would require clubs to apply to the Inland Revenue for exemptions.

Our proposals would define qualifying sports by reference to the list of recognised activities maintained by the Sports Council, to which I have already referred. It seems to us to be best placed to make such decisions. That would allow clubs to register with the Inland Revenue, which would be responsible for administering the exemptions.

These provisions have been the subject of wide consultation and the object of equally wide welcome. I hope that I have explained to the House why the Government's proposals, not those in the new clause or the amendments, should be the basis for the Bill's support for community sports clubs. On that basis, I encourage the hon. Member for Arundel and South Downs to withdraw the new clause. If he will not, I urge my right hon. and hon. Friends to vote it down.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs

Half a pint is better than no pint, but our new clause and amendments are clear. They simply ask why on earth we should have slightly different rules under this mechanism. Instead, we should have a system under which amateur sports clubs get the same tax breaks either under the Bill or as charities. There will be confusion as a result of the difference, and I am afraid that there is some disappointment.

Our lawyers advise us that there is nothing more in what we propose, although I have specifically raised the issue of membership. Our proposals seem to us by far the better solution. The Treasury is proving that it can do it as it wishes, as it is already doing, but that is simply to avoid what is called the golf club problem. We think that what we propose is right, and we are not satisfied with the Government's measures—welcome though they are as half a pint. Sports clubs could easily have been treated the same as charities.

Question put, That the clause be read a Second time:—

The House divided: Ayes 179, Noes 296.

Division number 290 Orders of the Day — Finance Bill — [1st Allotted Day] — New Clause 7 — Taxation of community amateur sports clubs

Aye: 179 MPs

No: 296 MPs

Ayes: A-Z by last name


Nos: A-Z by last name


Question accordingly negatived.