Clause 57 - Relief for community amateur sports clubs

Finance Bill – in a Public Bill Committee at 11:00 am on 23rd May 2002.

Alert me about debates like this

Question proposed, That the clause stand part of the Bill.

Photo of Roger Gale Roger Gale Vice-Chair, Conservative Party

With this we shall discuss new clause 3—Community amateur sports clubs to be treated as charities—

'.—(1) The promotion of sport, provision or sports facilities, physical education or healthy recreation by a registered community amateur sports club shall be treated as having a charitable purpose for the purposes of the Taxes Acts with effect from 17th April 2002.

(2) Paragraphs 1, 2, 3, 11, 12, 13, 14 and 15 of Schedule 18 shall have effect from 17th April 2002.'.

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

The new clause is designed to probe the Government's intentions. Hon. Members will be aware that there has been an historic problem with sports not being deemed suitable activities for a charity. The Charity Commission refined that last November by decreeing that sports activities whose ultimate objectives were health and fitness could be

viewed as suitable activities for a charity. In principle, that enabled a large number of sports clubs to qualify as charities. However, certain sports do not qualify, including angling.

Clause 57 and schedule 18 are designed to provide a framework of tax relief to those amateur sporting clubs that either cannot qualify as a charity or that decide that they do not want to do so. However, if an appropriate amateur sporting club is dedicated to a sport that does not qualify for charitable status, why have the Government not, for the sake of simplicity, granted tax exemptions that are parallel to those that would apply if it could qualify as a charity? We have, in effect, two sets of rules for sports clubs, one of which falls into the Inland Revenue's box and the other into the charitable box. They are not greatly different, but a few important differences relate to gifting and trading income. The Revenue impact will hardly be significant, so would it not have been simpler—per what new clause 3 would achieve—to give entirely parallel tax facilities to those available to charities?

On the subject of golf clubs and exploitation for social activities, the schedule empowers the Treasury to specify an eligible sport, so protection is retained against an exploitation of the principle. It seems unnecessary, however, to have cluttered up the system with two different tax packages. People who might want to support amateur sports clubs will make mistakes, which puts an onus on those running clubs to understand in detail both the charity rules and the Inland Revenue rules. Does it make sense to introduce a different tax package for such clubs?

Photo of John Pugh John Pugh Liberal Democrat, Southport

I shall put all my remarks into one contribution to save the Committee time and to allow me to probe the Financial Secretary's philosophy on the subject.

As has been mentioned, we have two distinct but parallel initiatives: the Treasury proposals for sports clubs, and the proposals from the Charity Commission and the Department for Culture, Media and Sport. Clubs are in the enviable position of being able to choose from an a la carte menu. We applaud the Government for doing something to help sports clubs. It is entirely a good thing and, from the Treasury's point of view, very prudent. Given the huge amount of money required for the national health service, we can conclude that a healthier, sportier nation will result in appreciable savings to future health Bills and to law and order as people will be happily exercised in recreational activity.

However, the choice between registration under the Treasury regime and charitable status under a different regime is taxing sports clubs a little. I have a briefing from the Rugby Football Union, which is unsure as to how to advise its members. The briefing states that the Treasury proposal has only limited tax exemption for investment, does not include the mandatory rate relief, and that company donations to sports clubs will not qualify for tax relief. On the other hand, it also suggests that the Treasury is much the preferred option, as the regime suggested by the Charity

Commission imposes some fairly onerous duties and responsibilities. It makes it clear that the registration of a club as a charity involves a change in ethos, and that certain clubs will not be able to register as charities. Sports clubs are faced with a dilemma and I invite the Financial Secretary to comment on that.

I understand the line that the Charity Commissioners have taken; they place an emphasis predominantly on healthy recreation. They specifically exclude activities that they do not regard as healthy recreation. For example, snooker is excluded because, although it has a benefit for people's mental health and amusement, incidental by-products, such as drinking and smoking, are not good for individual health. [Hon. Members: ''What about Rugby?''] I was coming to that. Such sports can create a net disadvantage to the health service. Similarly, the commissioners exempt extreme sports, which are good for cardiovascular fitness but lead to many unnecessary injuries.

The Charity Commission's proposals could almost have been designed by the Treasury because, at the end of the day, the bill to the taxpayer is likely to be significantly reduced if the proposals are implemented across the board. However, the Treasury's thinking is not clear. The Bill leaves the registration of sports to the Treasury's discretion. Paragraph 14 of Schedule 18 states that

'''eligible sport' means a sport that is designated for those purposes by Treasury order.''

In other words, it is precisely what the Financial Secretary designates as such.

In a way, I have great sympathy for the Financial Secretary. I can understand that he does not want to subsidise activities that would happen anyway. In a sense he wants more bang for the Treasury buck. There are no arguments against keeping the process under tight Treasury control. However, to return to the basic principle, if his philosophy is to have a healthy nation, which is why the tax exemptions are being made, and to ease what we all desire—an expansion of sports facilities, so that they progress and develop—the proposals by themselves do not go far enough. They do not seem to be sufficiently imaginative.

If the object of the Treasury is to secure large-scale expansion and real development of sports facilities—I like to think that that is the Treasury's objective, or at least the Financial Secretary's, who I would not expect to be interested in simply cosmetic improvements—the legislation needs to be framed in such a way that it does not fall prey to an obvious accusation. One could take the view that the charity route could be fairly expensive to public finances. One could also take the view that registration might be cheaper. Registration could be seen as a Pied Piper leading people away from the charity route. I do not think that that is necessarily the case, but I should be interested to know what the Financial Secretary feels about it.

I shall conclude by offering two further areas for consideration. Many new clubs face horrendous financial hurdles when they are set up, and particularly ambitious ones consider an element of cross-subsidy. I am familiar with a club in my constituency that has

used go-karting—a straightforward commercial activity—to fund a range of good and desirable facilities. I am not sure whether it would benefit from any of the exemptions offered by the Charity Commission or the Treasury. I wonder whether the Financial Secretary is considering what might be done in future.

A second area of concern is the status of professional clubs that we do not regard as charities. What would happen if they provided open access community provision? Let us take the hypothetical case of a professional football club. Such clubs are very cash-rich, and not candidates for charity—[Interruption.]—well, one or two of them are, but the major league club that I know best, which is closest to me, is Liverpool football club. As we all know, it contributed massively to the psychological well-being of that community. It does not have quite the same effect in Manchester, but it makes a massive contribution to the mental health of Liverpool. If one looks at the area around the ground to see what healthy living patterns exist, one will see deprivation and an absence of sporting facilities.

Is there a strong case for future tax exemptions for projects that are linked to professional clubs—there are many such schemes on the continent—and community facilities provided not for the benefit of the club, but the community in which it exists? Is there not further scope to make the fiscal system make a real difference? Is the Financial Secretary tentatively going down a route of responding to a lobby, or is he beginning a genuine and important fiscal journey that could result in the tax system's being used to benefit the health of the nation?

Photo of Roger Gale Roger Gale Vice-Chair, Conservative Party

Order. I am cognisant of the aspirations of the business managers and also of the time available to us this morning. More significantly, because we are here to debate the issues, I am also cognisant of the fact that many issues that are being raised are covered in the following schedules. The clause under discussion is effectively a paving clause for the schedule. Therefore, I hope that hon. Members will understand that if I invite the Minister to respond to those things that he feels are appropriate now, I will also create an opportunity for Members who wish to debate the issues thoroughly to do that when we debate the schedule and schedule stand part.

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

I am very grateful for that indication, Mr. Gale.

Clause 57 and schedule 18 introduce a package of tax reliefs for community amateur sports clubs. The sports club sector has long lobbied for parity with charities. The Charity Commission's announcement last November that it will recognise the promotion of community participation in healthy recreation by the provision of facilities for the playing of particular sports means that many clubs can now achieve that parity by becoming charities. However, we also realise that some clubs cannot or do not want to apply for charitable status. For those clubs, the separate tax package will provide access to some of the reliefs enjoyed by charities and those who donate to them.

In constructing the package, we have tried to strike a balance between supporting the clubs that are the life-blood of so many communities and recognising the interests of charities and other taxpayers, such as small businesses. The provision of the package as a safety net for those clubs that do not achieve charitable status has been widely welcomed. Howard Wells, chairman of the Central Council of Physical Recreation, was good enough to say:

''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 CCPR will work with Government to implement these proposals as effectively as possible.''

The Sport England chief, David Moffett, said:

''We welcome the Chancellor's announcement as a real boost for CASCs across the country.''

A point was raised about the Treasury seeking the power to define sport. Our approach was to adopt the list of Sport England, whose members are the people on the ground who do so much good work with clubs. By adopting its list, we avoided having to make value judgments about particular sports. That should be welcomed by the whole Committee. As soon as the Finance Bill receives Royal Assent, clubs will be able to apply to the Inland Revenue to be registered as community amateur sports clubs.

The hon. Member for Southport (Dr. Pugh) discussed the submissions that he has received from rugby clubs. What they are doing, perfectly properly, in the correspondence that he described is presenting the options to their members, who have a choice—not a dilemma but a choice. Of course, clubs must meet the criteria set out in schedule 18 of open membership, being organised on an amateur basis and promoting an eligible sport. An eligible sport will be designated by Treasury order, with reference to Sport England's list of recognised sports.

Most clubs are not trading when they carry on their main activity of providing sporting and ancillary relief to their members, so they normally pay no tax on their income. That will not change. Obviously, we have to take into account the nature of the clubs, and encourage and support them in seeking out new sources of funding.

The hon. Gentleman asked whether the measure was simply a response to lobbying or whether we have a broader vision. My answer is that we have a broader vision, which has been made clear by my right hon. Friend the Minister for Sport as well as by my right hon. Friend the Secretary of State for Culture, Media and Sport. It is one in which sport can contribute to health and regeneration and that is, I think, the experience of all of us in our constituencies.

There will be tax incentives to help individuals to support their local clubs and boost fundraising. However, we are not seeking to push clubs down a particular route. They will have a choice: they can follow the Charity Commission route, which is a welcome option in the light of the commission's decision to relax its approach to the charitability of sports clubs, or they can follow the Inland Revenue route. Both have benefits, depending on the needs of

the club, their response to their local community, their traditions and their history. It is for that and the contribution that sport can make that I ask the Committee to welcome the provision, as it has been welcomed by sport generally.

Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs 11:15 am, 23rd May 2002

Of course, relief is welcomed by amateur sports clubs that cannot or find it difficult to qualify for charitable status and the nitty-gritty will be discussed when we come to the schedule.

The point of principle--the difference between the Revenue package and the charity package--is not hugely material. One issue is that a charity can receive

gift aid on company and personal donations, but on the Revenue side it applies only to individual donations.

I hope that when the Government consider the matter further they will decide that it is sensible to align the two. The clause is welcome in principle and I look forward to going through the details of the schedule in due course.

Question put and agreed to.

Clause 57 ordered to stand part of the Bill.

Further consideration adjourned.--[Mr. Sutcliffe.]

Adjourned accordingly at twenty-two minutes past Eleven o'clock till Tuesday 11 June at half-past Ten o'clock.

Gale, Mr, Roger ( Chairman )

Boateng, Mr.

Brennan, Kevin

Casale, Roger

Cruddas, Jon

Cunningham, Mr. Jim

Curtis-Thomas, Mrs.

Davey, Mr. Edward

Field, Mr. Mark

Flight, Mr.

Grayling, Chris

Hoban, Mr.

Jack, Mr.

Laws, Mr.

Luff, Mr.

Luke, Mr.

Marris, Rob

Pond, Mr.

Primarolo, Dawn

Pugh, Dr.

Ryan, Joan

Smith, Angela

Southworth, Helen

Sutcliffe, Mr.

Wright, David