Schedule 18 - Relief for community amateur sports clubs

Finance Bill – in a Public Bill Committee at 10:30 am on 11th June 2002.

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Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs 10:30 am, 11th June 2002

I beg to move amendment No. 69, in page 238, line 37, at end insert

'and may include a club which is incorporated'.

Photo of Joe Benton Joe Benton Labour, Bootle

With this it will be convenient to take amendment No. 70, in page 239, line 22, at end insert—

'(4) A club does not cease to be open to the whole community under (1) above if it has rules allowing it to expel members for inappropriate or disruptive behaviour.'.

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

Good morning, Mr. Benton. I welcome you back to chairing our deliberations. I must apologise to the Committee because I must go and speak in the financial services debate at 11 o'clock. I hope that we shall have completed schedule 18 by that time, but if not my hon. Friends will take over.

I hope that there is a chance of a stand part debate, because I recollect that when we were debating clause 57 before the holiday we had discussed its principle but had not wound up the subject. Amendments Nos. 69 and 70 are specific and seek to extend eligibility for the new relief to additional types of club. We want to stress the major point that the new relief is unnecessarily complex and restrictive. It would have been better to give qualifying sports clubs the same tax relief measures as those enjoyed by charities. The Law Society says that the relief is welcome, but that it will add to, rather than replace, existing tax reliefs. The relief will therefore add to the complexity of existing reliefs, and that could have been avoided by bringing all sports clubs under a single regime, which is something that we sought to redress with new clause 3.

I shall divert to apologise for having initially omitted to welcome the hon. Member for Wentworth (John Healey) to his new post of Economic Secretary to the Treasury, and I congratulate him on that. We share views about the importance of skills training and have spoken together about that.

The Law Society also comments that it should be made clear that ''clubs'' extends to corporate bodies, provided they have complied with amateur requirements. Although the principles in paragraph 2 are laudable, the question is whether they will impose unforeseen constraints on the clubs concerned. It should be clear, for example, that a club does not cease

to be open to the whole community because it has rules allowing its members to be expelled for inappropriate or disruptive behaviour, so an addition to paragraph 2 should be made.

The reliefs for donors in paragraph 9(3) should extend to include relief for a club from stamp duty on any assets that it acquires. The provisions allowing gifts of assets to charities should also extend to sports clubs. Paragraph 14 contains the definition of an eligible sport, which will be designated by statutory instrument. It might have been easier to include a list of sports in the legislation. Given the adverse tax consequences that follow from a club ceasing either to be registered or to hold property for qualifying purposes, surely a list of eligible sports clubs could be laid out in statute to create certainty on the core list of activities that can be undertaken to give rise to the relevant tax reliefs. The two amendments are designed to address those issues.

One point has come to my attention since our previous discussions. The Treasury proposals last November contained a specific pledge to permit 80 per cent. rates relief to qualifying sports clubs. That seems to have disappeared and the promised relief is less generous than that suggested by the Government during the election campaign. I have received many complaints from sports clubs that the package is not what they had been led to believe. We believe that parity with charity is the correct approach. The costs would not be hugely material but the administration would be much easier.

Photo of John Pugh John Pugh Shadow Spokesperson (Education)

During the recess, I occupied myself usefully with this amendment by consulting the local sports council in Sefton, which is, as you know, Mr. Benton, a reputable and sound body. I gave it the good news about the tax incentives and benefits, but its response was a little muted because the world of large donations and trading incomes of £15,000 plus seems a little foreign to it. Its main interest each year is to get by without being in debt and its main financial preoccupation is meeting the rates bill. The registration scheme poses a dilemma: if it follows the route of charities, mandatory rates relief will be 80 per cent., but if it goes for registration, there will be no such benefit and discretionary rates relief from the local authority could be adversely affected. There was not enormous delight because the benefits were thought to be rather modest.

One matter of concern, which is the thrust of the amendment, is that the Treasury has reserved to itself the right to define what is an eligible sport. There is an uncontentious mechanism to get around that and to get the Treasury off the hook. For all its expertise, the Treasury is not good at defining sports because it is not an area in which it has a substantial body of knowledge. I should have thought that eligible sports could be as well defined by Sport England as by anyone else and certainly better than the Treasury, unless the object of the Treasury in defining eligible sports is to control the rate of tax relief.

Will the Treasury evaluate whether the adjustment is successful in encouraging sports clubs? If there is no evaluation, there is a danger that what the measure

achieves might be cosmetic. I do not think that that is the Treasury's intention and it should explain how it will evaluate the success of the measure.

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

It is a privilege and a pleasure to join this Committee, albeit in slightly unusual circumstances, and my hon. Friends on the Front Bench. It is a particular pleasure to join the Committee under your chairmanship, Mr. Benton, and that of your co-Chairman, Mr. Gale. It is clear from the Official Report that your firm and fair chairmanship has helped the Committee to make good progress.

I could not help noticing in the Official Report that the first sitting was peppered with sporting metaphors from jousting to ''Just a Minute'' and from saloon car racing to stunt wrestling. My right hon. Friend the Chief Secretary to the Treasury, whose brief I have inherited but, confusingly for some, not his title--he is still a member of the Committee--was almost prescient in his reference to the World Wrestling Federation because I feel like a tag wrestler being introduced into the contest in the middle of a round. However, I shall do my best to pick up the excellent work that he has done and to play my part on the Treasury's excellent Front-Bench team.

Although we are discussing the narrow amendments Nos. 69 and 70, the hon. Members for Arundel and South Downs (Mr. Flight) and for Southport (Dr. Pugh) introduced points that range much wider. With your indulgence, Mr. Benton, I shall deal with them as well as the amendments.

I was disappointed to hear the hon. Member for Southport dismiss the clause as modest. In many ways, that talks down the value of the measures, which are widely welcomed by sporting federations and, more important, the local community sports clubs that they are designed to benefit. If the hon. Gentleman's experience in his constituency was reflected in his comments, I must tell him that it is not the universal reaction that many of my hon. Friends and I have had from sports clubs in our patch.

Both hon. Gentlemen raised the question of business rate relief. I am aware that sports clubs and some of their organisations are making a case for that, but I point out to Opposition Members that decisions on business rates are not for the Treasury but for the Department in charge of local government policy and finance. The matter cannot be dealt with in the Finance Bill. However, the measures in the Bill represent a generous package of support for local community sports clubs.

Both hon. Gentlemen also posed a question about the Treasury definition of sports.

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

I am aware that the business rates issue must be dealt with under separate legislation, but Sport England's and my understanding is that it will entail relief of only 50 per cent., not 80 per cent., which everyone was led to expect.

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

Business rates relief for sports clubs that are not charities is a matter of local discretion. A basic principle of local government introduces a

distinction between charities and non-charitable sports clubs. If I may, I shall deal first with a further point that the hon. Gentleman raised in his brief introductory remarks and then revert to the question of who defines eligible sports and sports clubs.

The hon. Gentleman's point that the measure does not offer full ''parity with charity'' is true. However, the Bill includes a generous package in parallel to what is available for charities. The Charity Commission's decision last November to recognise as charitable those sports clubs that are engaged in the promotion

''of community participation in healthy recreation'' allows many sports clubs to achieve charitable status if they choose. The crucial point is that it is for the clubs to decide whether such a status suits their purposes and membership.

If clubs decide, for whatever reason, that they do not wish to be charities, there is no reason why they should enjoy exactly the same benefits as charities, as they would not have to fulfil exactly the same requirements and responsibilities as charities, which are regulated by the Charity Commission. We are trying to strike a balance between supporting the clubs and respecting and taking into account the interests of registered charities.

Let me turn to the question of the Treasury defining sport. The hon. Member for Southport said that he doubted that the Treasury had the expertise to make such judgments. My hon. Friend the Member for Bradford, South (Mr. Sutcliffe) might disagree with him, but the hon. Member for Southport is right. The Treasury will not take decisions about what should be classified as a sport. Sport England already has a list of recognised activities, and we have decided that it would be most appropriate—initially, at least—to link the definition of eligible sport for the purposes of clause 57 to that list, rather than have Treasury Ministers of whatever description proposing what should constitute an eligible sport. The matter can be dealt with by statutory instrument, which can be readily amended should circumstances require it.

Photo of John Pugh John Pugh Shadow Spokesperson (Education) 10:45 am, 11th June 2002

Will the hon. Gentleman clarify whether he is suggesting that a sports council list will be accepted wholesale by the Treasury, which will authorise it, or is the Treasury in a position to pick from a menu of sports put forward by the sports council?

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

Our intention, and my commitment to the Committee, is that we will use the list of recognised activities produced by the sports council in England, which will be the basis on which we frame statutory instruments that define which sports are eligible.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

I join colleagues in welcoming my hon. Friend to the Front Bench. I wish him well in his new appointment.

I welcome the new measure. Will the Economic Secretary make it clear whether amateur football clubs are likely to be eligible? He will be aware that recently we have seen the disappearance of our community professional sports club to Milton Keynes—our local

Wimbledon football club is to go there. We are going to start a community amateur sports club—a new football club—called Wimbledon association football club. I shall certainly put my hand in my pocket to support that new venture. I hope that my donation and those of other members of the community will qualify for the new relief, which will help us on our way to replay the wonderful story of Wimbledon football club, which is starting again from scratch.

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

This is new indeed: Wimbledon loses one football club to Milton Keynes, but gains another. My hon. Friend has always given strong support to constituency activities. I can confirm that football is on the list of recognised activities. Community amateur football clubs will qualify as eligible under the Bill.

I should like to give an indication to the hon. Member for Southport of how we will approach monitoring the impact of the new provisions, and determining in the long term whether they have had the impact that we seek. I draw on his earlier observation to say that the Treasury alone does not have the expertise to make such a judgment; nor would it seek to make one alone. As the Chancellor undertook in the Budget, we will continue to assist with the development of community amateur sport, and will demonstrate and underline our continuing commitment to such clubs. We will do so in close liaison with the Department for Culture, Media and Sport and in dialogue with many other sporting interests. I am meeting my right hon. Friend the Minister for Sport on 3 July to discuss those issues.

I shall turn now to amendments Nos. 69 and 70. As the hon. Member for Arundel and South Downs said, the amendments seek to put beyond doubt a couple of points in legislation. Amendment No. 69 would ensure that incorporated clubs came under the legislation. Nothing in the Bill prescribes the form that a community or amateur sports club must take; nor should it. I therefore give an assurance to the hon. Gentleman and to other Committee members that an incorporated club would be able to register, provided it met the criteria for registering under the schedule.

Amendment No. 70 seeks to ensure that a club would not fail to meet the criterion of being open to the whole community because it had rules that allowed members to be expelled for inappropriate or disruptive behaviour. We do not intend to prescribe in schedule 18 detailed rules for every registered community or amateur sports club. We want to leave general rules relating to the conduct of club activities to good sense and to the wishes of club members; that is part of the clubs' autonomy. The Inland Revenue will take a common-sense view of those rules, and will be concerned only if a rule offends the spirit underpinning the criteria. Clearly, a club must be able to exclude members if the presence of those members is disruptive to the orderly running of the club. I am happy to put on the record an assurance that such a rule will not preclude a club from being registered as a community amateur sports club for the purposes of the provision.

On the basis of those two assurances, I hope that the hon. Member for Arundel and South Downs will withdraw the amendment.

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

I thank the Economic Secretary for dealing with those two points. His response was entirely satisfactory. Under amendment No. 70, the broad rule would be open membership, but clearly that raises the issue of what the position would be with regard to expelling people who clearly acted improperly. Although the hon. Gentleman's response to incorporation was not crisp, it was satisfactory.

Which amateur clubs will qualify for charitable status, if they wish to apply for it? Our understanding is that the Charity Commission will need to decide on the principle of whether an activity is capable of improving physical health and fitness. It has already made it clear that certain sports, such as angling, ballooning, billiards, crossbow, pistol shooting, flying, gliding, motor sports and parachuting will not meet that principle, and there may be others. Not all amateur sports clubs will have the choice between applying for charitable status and the package under the clause. If there were a choice, there would be more logic in saying that a certain package was less generous and that the other was the full charity package.

Moreover, amateur sports clubs have advanced the sensible argument that, with all the toing and froing, qualifying as a charity is a cumbersome, expensive and complex matter. If it were decided to give charities tax benefits, it should be administratively easier for them to qualify and apply for such benefits. We believe that the measure is unwise. People will misunderstand the situation. There will be a lot of hassle, for example, if certain gifts did not qualify, but would qualify if they were charitable. The cost savings are not worth the candle in terms of the national economy. Hassle will be created by a slightly different and ungenerous rule. The logic of the Economic Secretary's speech was not correct. For starters, many sports clubs will not qualify as charities.

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)

The hon. Gentleman referred to the limited cost of some of his ideas. Has he noted that, in the Red Book for 2003-04, the total cost of the proposal will be a mere £5 million? The extra costs of his ideas will be small.

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

I thank the hon. Gentleman for that response. If hundreds of millions of pounds were involved, there would be a simple budget controlling argument. However, the amounts involved are not worth the candle. We remain strongly of the view that it is unproductive to have separate rules.

However, with regard to amendments Nos. 69 and 70, we appreciate the Minister's comments, and he has answered our questions satisfactorily for the record. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Mark Hoban Mark Hoban Opposition Whip (Commons)

I beg to move amendment No. 41, in page 240, line 28, leave out from beginning to 'and'.

Photo of Joe Benton Joe Benton Labour, Bootle

With this we may discuss the following amendments: No. 42, in page 241, line 1, leave out from beginning to 'and' in line 2.

No. 43, in page 241, line 24, leave out from beginning to 'and'.

No. 44, in page 242, line 7, leave out 'income and'.

No. 45, in page 242, line 11, leave out from 'is' to 'the' in line 14.

No. 46, in page 242, line 17, leave out 'income and'.

No. 47, in page 242, line 19, leave out 'income and'.

No. 48, in page 242, line 22, leave out 'income and'.

No. 49, in page 242, line 41, leave out 'income and'.

No. 50, in page 242, line 42, leave out 'income and'.

No. 51, in page 243, line 3, leave out 'income and'.

Photo of Mark Hoban Mark Hoban Opposition Whip (Commons)

The hon. Member for Southport was right to describe the relief as modest earlier. That point was amplified by both my hon. Friend the Member for Arundel and South Downs and the hon. Member for Kingston and Surbiton (Mr. Davey). As is pointed out in the Red Book, the relief will cost £5 million next year and £10 million in the fiscal year following that.

I tabled the amendment because the relief is already restricted in so far as the income limits to which tax relief will be granted are set out in the Bill. For example, trading income is limited to £15,000, and property income to £10,000. There is a further restriction based on the proportion of expenditure and income that is applied for qualifying purposes.

Many sports clubs will find the task of trying to identify what income expenditure is to be applied for qualifying purposes onerous. I spoke to a couple of local sports clubs before the recess to identify what levels of expenditure they thought would be applied for qualifying. First, they said that that would depend on how the rules were interpreted, and that they would need more guidance than is given in the schedule. Secondly, by their interpretation, the proportions of qualifying expenditure would be very high. One club suggested that it would be 90 per cent., and another 78 per cent, of its expenditure.

We are imposing a burden on sports clubs that is perhaps not necessary. Most sports clubs earn very little surplus on which they can be taxed anyway. The vast majority of their expenditure is incurred for the purposes of qualifying. To force clubs to jump through further hoops to claim that relief places a disproportionate burden on them, one which runs against the spirit of what the Government are trying to achieve, which is to encourage clubs to grow and develop, and to stress their community aspects. Those who will have the task of leading and developing those clubs—the committee, the treasurers and the administrators—will spend a disproportionate amount of time trying to comply with the schedule.

I ask the Government to think about ways of lifting that burden. That is the spirit in which my amendment was drafted. I should like them to think seriously about whether the restrictions are necessary, or whether the provision places unnecessary regulations on sports clubs, which need all the encouragement that they can get to meet their objectives.

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

I assure the hon. Member for Fareham (Mr. Hoban) that we have considered the issues that he raises, but there are problems with his proposals. Amendments Nos. 41 to 51 would break the link between the tax relief that community amateur sports clubs will enjoy on their income and the condition that they should spend that income on their main purpose of providing facilities for, or promoting participation in, an eligible sport. The amendments would provide community amateur sports clubs with tax relief on their income, without ensuring delivery of the intended outcome of providing facilities so that local communities can participate in sport.

Clearly, the amendments would also open up some tax avoidance opportunities. I urge members of the Committee to consider the implications of the proposal. The requirement that the income should, as a condition of the relief given, be applied for the community amateur sports clubs' main purpose of providing sports facilities merely replicates the arrangements for charities, whose income is only exempt if it is applied for charitable purposes. There is no reason why such a condition should not apply to sports clubs, too. I hope that the hon. Gentleman will withdraw the amendments. If he does not, I shall ask my hon. Friends to reject them.

Photo of Mark Hoban Mark Hoban Opposition Whip (Commons)

I am disappointed by the Minister's response. I had hoped for a more substantive reason than that of simply mirroring the rules for charities. The vast majority of the spending of many community amateur sports clubs' is on qualifying purposes. Two clubs in my constituency to which I spoke said that 70 to 90 per cent. of their income is spent on qualifying purposes. Although that sample is small, I believe that it is representative of community amateur sports clubs elsewhere.

The clubs are under pressure from their members to ensure that membership subscriptions and income earned from bars are applied to the clubs' purpose, and to ensure that coaching and facilities allow members to enjoy the sports that they joined a club to participate in.

I really think that the measure places a disproportionate burden on sports clubs. The vast majority of clubs will spend the greater part of their money on qualifying purposes. They are under pressure to ensure that that happens because members are a very demanding group and they will ensure that money is spent properly in the interests of the club rather than on non-qualifying purposes.

I do not intend to press the amendment to a vote, although the Minister's response was disappointing. It will disappoint treasurers and sports clubs throughout the country who want help from the Government rather than a further layer of rules and bureaucracy. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 18 agreed to.

Clause 58 ordered to stand part of the Bill.