Corporation Tax

[davidk65]

Could a small private, not for profit, sports club be liable for corporation tax on any money the hold in the way of savings?
It has approximately 100 members, the number rises and falls over time. It is financed by the members subscription. They have a reserve fund which is in a savings account, at a bank, under £35K at 1% per year.

[factor-fiction]

Corporation tax applies to profits, doesn't it, so no. Or do you mean should it pay tax on interest?

[buildersmate]

Not for profit description does not define a specific type of legal entity. What you probably are describing is an unincorporated organisation. If so, that is a simple organisational type that can be run for the benefit of the members and you do not have to register it (with HMRC or anyone else). Net income from savings is held in the club, and any income from bank accounts is paid net of tax so there is no other tax liability. In the event that the club is permanently dissolved, I believe that any distribution of funds to members becomes their personal liability to declare as income to HMRC for personal income tax.
If the club has charitable aims it could be set up legally as a charitable trust, and if it had an annual income of more than £5000 I think it would have to register with the charity commission. Under those circumstances tax on bank accounts could be reclaimed.
There are other methods of setting it up as social enterprises or cooperatives which may or may not have charitable aims, but I suspect that is not what you have here.

[davidk65]

Thank you for an excellent answer. Yes it is unincorporated and not registered as a charity. Reading else where on the site, I feel a little troubled now because I am not able to determine if the savings we have at the bank are paid net of tax. Looking at the statement there is nothing to say if it is taxed at source.There are some of our members who are convinced that the clubs savings are not taxed, but I know from my own circumstances that what I have on a personal level is. If you were to speculate, what are the chances that a Bonus Saver Acc with leading bank would or would not be taxed at source? Thank You

[factor-fiction]

It's good to see you back on here, buildersmate

[Skyline D]

The money will not be taxed at source. It is presumably either a club or corporate bank account. Interest will be paid gross (or it should be anyway, if they were deducting tax it would say so).

Yes, the club should be liable to tax on interest. If it is genuinely 'not for profit' than that's all that HMRC will be interested in. I act for a couple of such organisations. Some years they make a surplus, some years they make a deficit but the Revenue only tax the interest earned either way. And it should be payable as Corporation Tax as the organisation is a body corporate.

[Buenchico]

>>>The money will not be taxed at source

I don't entirely agree.

Interest on Barclays Bonus Saver Accounts is paid net of tax (i.e.after the deduction of tax) unless the depositor has completed HMRC form R85 to declare that they're not a taxpayer. So, if the club's treasurer has never submitted such a form on behalf of the club, Income Tax (rather than Corporation Tax) will have been deducted from the interest on the account. That could mean that too much tax has been paid!

However what nobody here seems to have mentioned is the importance of registering the club with HMRC as a CASC:
http://www.hmrc.gov.uk/charities/casc/register.htm

[Skyline D]

Fair enough Chris. A better wording from me would have been "should not be deducted at source". It's conceivable it is but it shouldn't be and it should certainly be obvious in the bank statement if tax has been deducted from interest.

I've never actually come across an account for treasurer's which paid interest net, and I can't currently find any indication that your Barclays one is available to Treasurers as it seems to not be available to new customers now. However, a bit of googling does quickly find a Nationwide Treasurers Account which pays it net so you are undoubtedly right that the situation can exist.

The link on CASC is interesting. I wasn't conscious of it, though it wouldn't affect anyone I act for and it would appear to be of limited importance unless the club happens to own a sports facility. The potential to reclaim Gift Aid is interesting though.