Sports Club – Charitable Status or CASC?

If you are currently working with a local sports club, you may be thinking about the club’s options for obtaining charitable status. Here, we discuss the possibility of obtaining charitable status, as well as the option of converting to a Community Amateur Sports Club (“CASC”). 

What does charitable status mean? 

One consideration may be for the club to look at obtaining charitable status. There can be much financial benefit in exploring this, and such status can be obtained by applying to become one of the following:  

1. Charitable company; 
2. Charitable Incorporated Organisation (“CIO”);
3. Charitable trust; or 
4. Unincorporated charitable organisation. 

The option you choose will be dependent on the goals of the club, and it would be recommended that you discuss this with your legal, tax and financial advisers. 

There are many benefits to having charitable status and these benefits include several tax reliefs and exemptions. Some examples of this would be exemption from corporation tax on interest and income from property, capital gains tax, inheritance tax, and much more. The club may also benefit from limited reliefs on taxes such as corporation tax on trading income, rates, VAT and stamp duty land tax (“SDLT”). This is not an exhaustive list, and more information on the exemptions and reliefs available can be found on the GOV website.  

In addition to financial benefit, the club would receive reputational benefit, although with that comes some restraints. To become a charitable sports club, the club must be compliant with the following conditions: 

• The club must be shown to advance amateur sports or promote community participation in healthy recreation, by providing facilities for playing particular sports;
• It must have an open membership (discussed further below); 
• The club must be amateur in nature – it is suggested that the definition of “amateur” in the Corporation Tax Act 2010 should be used for this purpose; and 
• Be for the public benefit – i.e. benefit the public and not just its members. It should be noted that this should not exclude those in poverty. 

Limitations: 

There are limitations when running a sports club as a charitable organisation. For example, should the club wish to pay its players, this would simply not be possible under such a structure, unless they are being paid for coaching or non-playing duties.  If this is something that is important to the club, it may be more favourable to consider a CASC arrangement (see below). 

There is also significant limitation in the club having a café, bar or other social setting, as so many do. Although it would still be possible to have these facilities in place, any membership and trading would need to be kept separate using a separate trading subsidiary. 

Linked to the point of income for the club, it is important to note that membership must be open, which means that it must be available to all who wish to play (i.e. encouraging community participation – see above). This therefore means that membership pricing cannot restrict those in less favourable financial positions to participate, and it should be noted that all members must be playing members or non-playing volunteers.  Providing facilities for social members only is not considered to be charitable and therefore does not meet with the criteria. 

What is a CASC?

A CASC is a club which is granted special tax status with HM Revenue & Customs (“HMRC”) in recognition of the fact it meets the conditions set out below. In order to qualify, the club must meet these conditions and have in place a formal constitution. As a CASC is not a charity, it is not registered with the Charity Commission and therefore complies only with HMRC regulation. The conditions for the club to comply with are as follows: 

• The club must be open to the whole community i.e. there must be no discrimination. An example of this would be disproportionate membership fees, which would make the club less accessible to those from lower income backgrounds;
• The club’s main purpose must be to facilitate or promote one or more eligible sports – a list of eligible sports can be found on the GOV website (List of community amateur sports clubs (CASC) registered with HMRC - GOV.UK)); 
• It must be organised on an amateur basis.  this will be accepted by HMRC if all profits are reinvested into the club, only standard benefits are provided to the members and guests (i.e. equipment and facilities – payment to players may be acceptable under certain circumstances) and that under the constitution, upon dissolution of the club all assets are donated to approved sporting and charitable purposes; 
• The facilities must be provided in an eligible area i.e. the EU, an EU member start or eligible territory; and
• The club must be managed by fit and proper persons – the test for this can be found on the GOV website (Guidance on the fit and proper persons test - GOV.UK)). 

Much like having charitable status, being a CASC has its benefits and many of these benefits are financial.   A CASC will benefit from many of the same exemptions as a charity such as capital gains tax, inheritance tax and corporation tax however, it does not benefit from payroll-giving like a charity can, nor does it benefit from VAT relief or SDLT relief. If the main motive for moving to a CASC structure is financial, weighing up the pros and cons of both options (should both options be available) in this regard would be essential.

There is also no requirement for a CASC to show it is in place for the public benefit (although it must be open to the community), which may be considered less restrictive than a charitable structure. 

Limitations: 

Some of the conditions of being a CASC can be restrictive and the main condition which often pushes club’s out of the criteria is that around income. To qualify as a CASC, any income generated from trading with anyone who is not a full voting member of the club, plus income from property, must be not exceed £100,000 per annum. Therefore, any clubs with social facilities and favourable sponsorship may push past this limit.  If this is the case, it is possible for some of the income sources to be managed through a subsidiary company, although it would be essential for the club to seek advice and ensure this is the best option for them. 

In addition to the limitation on income, it is a requirement for CASCs to have 50% participating members. There are also restrictions on membership costs and payments to players must be no more than £10,000 over any 12-month period (although this is less restrictive than the charitable option discussed above).

Related to income, fundraising income is only exempt up to £50,000 (unless a trading subsidiary is used) and rental income only exempt if less than £30,000. These are both wholly exempt if the club is registered as a charity with the Charity Commission. 

How can we help? 

The conditions, requirements and limitations of obtaining charitable status or becoming a CASC discussed in this article are not exhaustive and we would not recommend solely relying upon this information when making a decision with which route to follow. If you are considering converting your club to a CASC or charitable structure, we would be happy to advise.