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Amendment proposed (6 May): 12, in clause 35, page 36, line 18, at end insert—
(16) The Chancellor of the Exchequer shall, within three months of Royal Assent, undertake a review into the impact of the changes made by this section to the number of community amateur sports clubs in the UK.
(17) The report referred to in subsection (1) above must in particular examine—
(a) the value of company profit donations to community amateur sports clubs over the last four years;
(b) the amount of Class 1 national insurance contributions paid by community amateur sports clubs, and
(c) the average cost to community amateur sports clubs in order to retain their CASC status.
(18) The Chancellor of the Exchequer must publish the report of the review and lay the report before the House.’.—(Catherine McKinnell.)
It is a pleasure to serve under your chairmanship this morning, Mr Caton.
We were discussing corporate gift aid and community amateur sports clubs. The changes made by the clause will extend charitable donations relief to companies that give money to community amateur sports clubs. The new relief will encourage and reward more donations to help CASCs to provide the benefit of sport to their local communities. The Government are committed to maintaining and building on our sporting legacy following the success of the London 2012 Olympic and Paralympic games. CASCs are a vital building block in securing the legacy.
CASCs are community-based member sports clubs that are registered by Her Majesty’s Revenue and Customs. Their role is to increase and sustain sports participation while promoting volunteering, community building and social inclusion. I welcome the comments made by the hon. Member for Gateshead on the importance of community amateur sports clubs and the role they play. The role of a CASC is to encourage wide participation, in particular by people who cannot afford to participate in sport without special help. CASCs can receive certain tax reliefs, including limited exemptions from corporation tax and 80% relief from business rates. More than 6,400 grass-roots amateur sports clubs have been registered as CASCs since the scheme’s introduction in 2002.
HMRC carried out a review of the qualifying conditions for the CASC scheme in 2011. It found that the original legislation was unclear and caused confusion for clubs. As a result, the Government decided last year to introduce new rules that clubs must comply with to be eligible for CASC status. The rules will be clearer and easier for volunteer-run clubs to understand and apply. The Finance Act 2013 included some of the new rules and provisions to make more detailed regulations to deliver the remaining new rules. A consultation on the detailed rules was held last summer. One of the proposals in the consultation was to introduce tax relief for companies that give money to CASCs. That would align the treatment of gifts of money to CASCs with the rules for donations to charities. Companies have been able to claim tax relief on gifts of money to charities under what is sometimes known as corporate gift aid for many years.
The hon. Member for Newcastle upon Tyne North asked why the measure relates only to gifts of money and does not extend the relief to gifts of land and shares to a CASC, as is the case for charities. There are clear differences between CASCs and charities, so it is right for the rules on tax relief to take account of the differences. For example, CASCs are subject to less regulation and scrutiny than charities are, and the lighter regulation is balanced by CASCs’ more limited access to tax reliefs.
As the Opposition have highlighted, gifts can be in forms other than straight cash—for example, land may be offered to an amateur sports club. Also, some businesses may wish to support more than one amateur sports club and therefore to sponsor a facility such as an all-weather pitch and access to it. Would those businesses still be allowed to pick up the tax relief, bearing in mind that we are not talking about a straight cash transfer, but cash to facilitate access to such facilities for their sport?
I thank the hon. Gentleman for his intervention. My understanding—I will be happy to return to this later if I am wrong—is that the relief is only on gifts of money. As I am explaining, there is a difference between charities and community amateur sports clubs. In return for lighter regulation of CASCs—I will come to the administrative burden that we do not want to impose on sports clubs—donors can get tax relief only on money, not on gifts of land or shares. I expect that a donor would be happy to give money towards building new pitches, for example, rather than donating the land on which the pitches were situated. If I have got that wrong, I will happily come back to the hon. Gentleman.
Community amateur sports clubs can, if they choose to do so, arrange their affairs so as to qualify as charities, but they would need to register as charities. Those that do so will get all the tax reliefs to which a charity is entitled. As the hon. Member for Newcastle upon Tyne North mentioned, the proposal to extend corporate gift aid to CASCs has been widely welcomed, including by the Association of Taxation Technicians. The Government announced in November that they would implement the proposal in this Finance Bill. Draft clauses were published for consultation in December and there were no substantive suggestions for change. Indeed, the Association of Taxation Technicians described the proposals as
“a proportionate response to the competing needs of sustaining sports participation whilst preventing those reliefs from being used in a way that the Government had never intended.”
Let me turn to the proposed changes. Subject to meeting certain conditions, companies will be able to claim tax relief on donations of their profits made to a CASC on or after 1 April 2014. The CASC will be exempt from corporation tax on such donations, provided that they are used by the CASC for wholly qualifying purposes, such as providing facilities for eligible sports and encouraging people to take part in them. To prevent abuse of the new relief, any donation that is not used for wholly qualifying purposes will result in the CASC being liable for corporation tax. This measure will enable trading company subsidiaries of CASCs—for example, a company that provides catering services for the club—to donate its profits to its parent CASC free of tax.
Subsidiary trading companies of a CASC could be vulnerable to abuse. That might happen where the company was under the control of the CASC’s officials without full scrutiny by the wider CASC’s members. To counteract that risk, the new rules include targeted and proportionate anti-abuse provisions to discourage manipulation of the subsidiary company.
The hon. Member for Newcastle upon Tyne North asked me to reassure volunteers, organisers and members of CASCs about the approach that the Treasury and HMRC are likely to take in enforcing the rules. I am happy to do so. HMRC will write to every CASC when the new rules are introduced to explain what they need to do. It will also publish clear guidance to explain the new rules. Anyone who needs additional help will be able to get it from HMRC. The national governing sports bodies will also provide support to their member clubs to help them to decide what to do. In addition, clubs will have 12 months to make any necessary changes.
Amendment 12 would require a review of the clause’s impact to be carried out within three months of Royal Assent. I will ask the hon. Lady to withdraw her amendment because, most importantly, the terms of the review would create a huge and unnecessary administrative burden on the clubs themselves. The information on corporate donations received in the past four years would have to be provided by those clubs, as no one else has that information: clubs and companies have not been required to provide such information to HMRC. Therefore, every club—most clubs are run completely by volunteers—would have go through their records for the past four years to extract information about donations. I am sure that Opposition Members would not want to put clubs through that exercise. We want to make it easier, not harder, for the hard-working and dedicated volunteers of CASCs to get on with their real work in their communities: providing facilities for, and promoting participation in, sport.
I appreciate the hon. Lady’s concern about the potential administrative burdens on clubs that need to make changes to remain within the CASC scheme once the new regulations are introduced. However, the alternative to this change in the rules was to enforce the old rules, which, as I have said, were unclear and would have meant some clubs leaving the scheme altogether. All CASCs will be able to remain as CASCs under the new rules, although some may have to make some changes to stay within the rules.
We do not know how many clubs will be affected by the new rules. HMRC does not collect detailed information about CASCs because that would create another unnecessary administrative burden on the clubs. Most clubs do not need to make a tax return every year and HMRC estimates that most CASCs will not need to do anything. They are CASCs under the old rules and they will continue to be so under the new rules.
It is not possible to say what the administrative cost of the change will be. Clubs that need to change will need to do different things depending on their individual circumstances. The costs will mainly be limited to reading the new guidance and confirming that the club meets the scheme’s rules in practice. For example, some clubs will need to ensure that they offer low-price memberships for those on low incomes.
I appreciate the concerns that the hon. Lady raised about rugby clubs and others that use extra income from trading activities to help to support their sporting activities. Such income helps to ensure that the clubs are accessible to the whole community, and I believe that should continue. We have therefore increased the trading exemption from £30,000 to £50,000 to allow a CASC to carry out the same amount of trading with non-members as charities. The purpose of the CASC scheme, however, is to promote and facilitate sport. If a club carries out extensive trading with non-members, it needs to assess whether its main purpose is to play sports or to generate income through trading. In the latter case, the club cannot be a CASC. The new rules, which I will come to shortly, strike a fair balance on that.
Clubs with high levels of trading—above £100,000 a year—will need to decide whether they wish to remain in the CASC scheme. Some may decide to follow the example of those CASCs that have already set up subsidiary trading companies. The measures will assist such clubs because the subsidiary companies will be able to claim tax relief on any profits they give to the CASC. We do not know how many more clubs will opt for CASC status as a result of the changes. HMRC will be working with the Department for Culture, Media and Sport, Sport England and the respective sports bodies in the devolved nations, and the national governing bodies of various sports to promote the CASC scheme to the sports sector over the next few years. There is a great deal of potential out there and we want to encourage clubs to consider applying for CASC status.
Although the clause does not have any impact on national insurance contributions, as the hon. Lady mentioned on Tuesday, clubs with employees will be paying less in class 1 employer contributions this year. The employment allowance will reduce their bill by up to £2,000 and provide a welcome boost to clubs with employees. The amendment is unnecessary and would create a heavy and unwelcome administrative burden on clubs. I therefore ask the hon. Lady to withdraw it.
To answer the hon. Member for Inverclyde, there is no tax relief on sponsorship for companies that sponsor CASCs or charities. Companies may be able to get tax relief if the sponsorship is for advertising—that applies to both CASCs and charities. Companies can get tax relief on gifts of land to charities, but not to CASCs. That process can be quite complicated, because land valuations and legal transfers are needed. As I have mentioned, CASCs are lightly regulated and would experience an administrative burden if we expanded the donation scheme. That is why the scheme has been limited to money. I hope that answers his questions.
The Government are committed to promoting a healthy sports sector that provides everyone with the opportunity to enjoy the benefits of participating in sport. We are determined to continue building on the Olympic legacy by promoting grass-roots sports, and CASCs have a vital part to play in their local communities in helping us to realise that ambition. Fundraising and financial support are very important to CASCs. Even with the generous tax reliefs available to them, many clubs struggle to survive on their current funding, so any additional financial support they can receive from donations will be welcome. We hope the measures will provide CASCs with a new means of fundraising and encourage companies to donate more to their local CASCs.
I thank the Minister for her thorough response to the concerns we have raised. However, the amendment asks only for the potential impact of the changes to be monitored and kept under review. That is reasonable, given the impact the clause could have on CASCs, which are vital in so many communities. We will therefore be pressing the amendment to a vote and urge all hon. Members to support it.