Clubs, Societies and Voluntary Associations
This guidance gives some general information about the tax position of clubs, societies, voluntary associations and similar bodies which are run either for the benefit of their own members, or for the wider public good.
It does not cover the tax rules concerning clubs in detail, but simply answers the questions which are often asked by club officials. If you have specific questions which are not covered here, please refer to your own Tax Office for details on how to find it.
The term 'club' used throughout this guidance does not apply to
- privately owned clubs run by their owners as commercial enterprises for personal profit
- housing associations (except most flat or property management companies)
- trade associations
- thrift funds
- holiday and Christmas clubs
- charities
- mutual insurance arrangements
- local authority associations
- credit unions
- investment clubs
- a company which has one or more associated companies.
Our club is not a profit making organisation. Why should it be affected by tax?
Even though your club does not aim to make profits, it may get funds from activities or transactions which produce taxable income or chargeable gains.
Our club only makes money for charity. Surely charities are exempt from all tax?
There are special rules if your club is a charity. You can get advice on its tax position from HM Revenue & Customs, Financial Intermediaries and Claims Office (FICO), (Charity Repayments), Unit 361, St John's House, Merton Road, Bootle, Merseyside L69 9BB, telephone 0151 472 6036. (In Scotland, from HM Revenue & Customs, Financial Intermediaries and Claims Office (FICO) (Scotland), Trinity Park House, South Trinity Road, Edinburgh, EH5 3SD, telephone 0131 551 8127.)
If your club is not a charity but raises money for distribution to charities, it still comes under the normal tax rules outlined in this guidance.
If your club is liable to tax on the profits of a particular fund-raising event, you may be able to use the Gift Aid scheme to pass the profits of the event to a charity in a tax-free manner.
What sort of tax will our club have to pay?
Clubs have to pay corporation tax on their taxable income and chargeable gains which are called 'profits'. Even clubs which are not limited companies still have to pay corporation tax. There is a special tax definition of 'company' which includes 'unincorporated associations'. Most clubs which are not limited companies are 'unincorporated associations'.
What is meant by 'income' and 'chargeable gains'?
Income can arise, for example, from
- bank and building society accounts, local or central government securities, and other similar investments
- trading activities
- property lettings.
A chargeable gain can arise, for example, when
- an asset is sold for a profit
- a capital sum is received from the ownership of an asset .
If you require more information about chargeable gains, please see our leaflet 'Capital gains tax . An introduction' (PDF 1.1MB), or contact your Tax Office.
Does corporation tax relate to a year ending on 5 April like income tax?
No, the corporation tax financial year ends on 31st March. Corporation tax is charged on the profits arising in an accounting period which cannot be longer than 12 months. Clubs often choose to end their own accounting period on 31st March so that it is the same as the corporation tax financial year, but any date can be used.
If your club's accounting period does not end on 31st March, it will be necessary to split the profits on a time basis so that the right amounts are taxed in the respective corporation tax financial years. The example in this guide explains how to do this calculation.
The rates of corporation tax are fixed every year by the Chancellor in the Budget. For most clubs, the rate of tax will be the 'small companies rate' which is 21% for the year ended 31 March 1999 (financial year 1998), and 20% for the year ending 31 March 2000 (financial year 1999).
For the year ending 31 March 2001 (financial year 2000), a new starting rate of 10% will apply if the taxable profits are £10,000 or less.
Your Tax Office has full details of the rates for all other financial years.
What is the tax position on fund-raising for charity?
As a concession, we do not seek to tax the profits made on some small scale events arranged to raise funds for charity. You can get a guidance entitled 'Fund-raising for charity', which explains how we operate this concession, from HM Revenue & Customs, Financial Intermediaries and Claims Office.
The full text of this concession is as follows
Bazaars, jumble sales, gymkhanas, carnivals, firework displays and similar activities arranged by voluntary organisations or charities for the purposes of raising funds for charity may fall within the definition of 'trade' in Section 832, ICTA 1988, with the result that any profits will be liable to corporation tax. Tax is not, however, charged on such profits provided that all of the following conditions are satisfied.
- the organisation or charity is not regularly carrying on these trading activities
- the trading is not in competition with other traders
- the activities are supported substantially because the public are aware that any profits will be devoted to charity, and
- the profits are transferred to charities or otherwise applied for charitable purposes.
Is tax payable on donations of either money or goods which our club receives?
In addition to the above concession, we do not treat the sale of donated goods at auctions, jumble sales and other similar events as trading, providing the goods have not been significantly changed or refurbished before sale. No tax will be due on the proceeds of these sales.
We will not tax donations of money, but when a fund-raising event falls outside the above concession it is open to the organisers to set a basic minimum charge (which will be taxable), and to invite those attending the event to supplement this with a voluntary donation. The additional contributions will not be taxable if all the following conditions are met
- it is clearly stated on all publicity material, including tickets, that anyone paying only the minimum charge will be admitted without further payment
- the additional payment does not secure any particular benefit (for example, admission to a better seat in the auditorium)
- the extent of further contributions is ultimately left to ticket-holders to decide (even if the organiser indicates a desired level of donation)
- for film or theatre performances, concerts, sporting fixtures and similar events the minimum charge is not less than the usual price for the particular seats at a normal commercial event of the same type
- for dances, dinners and similar functions the sum of the basic minimum charges is not less than the total costs incurred in arranging the event.
Is tax payable on our members' subscriptions?
No. We do not treat the general subscriptions or contributions made by individual members to club funds as part of your club's taxable income.
Where, however, separate charges are made on members for their private use of club facilities or premises (for example, private parties) those receipts will be treated as income of your club and will be liable to corporation tax. See paragraph below about claiming expenses.
Is any bank or building society interest exempt from tax?
No. All bank interest is paid without any tax being taken off. It is chargeable to corporation tax and must be reported to your Tax Office.
Building society interest is normally paid after tax has been taken off. The rate used for the year ending 5 April 2000 is 20%, but you can have the interest paid gross by completing a declaration (which can be obtained from the building society) confirming that your club is a company for tax purposes. Whether tax is taken off or not, all building society interest is chargeable to corporation tax and must be reported to your Tax Office.
What about our club's income from which tax has already been taken off before it is received?
If the income is interest, or covenanted, or similar annual payments, the gross amount of that income is chargeable to corporation tax, but any tax taken off is set against your club's total corporation tax bill.
If the income tax taken off is more than the corporation tax payable, we will repay the balance of the income tax. If the amount is less, your club will have to pay the balance of the corporation tax that is due.
Can our club claim expenses against its taxable income?
That depends on what the expenses are, and how they arise. The day-to-day running expenses of your club are usually met from members' subscriptions and these are not taken into account in working out any corporation tax liability. If your club incurs expenses in earning a profit from trading, these are usually allowed as a deduction in working out the trading profit. If a trading loss is made after allowing the expenses, the loss can be
- set against other profits chargeable to corporation tax For the same accounting period, or
- set against future profits from the same trade.
If your club receives income from property lettings, including private lettings to members, allowable expenses can be offset against that rental income. Any loss made in this way can be
- set against other profits chargeable to corporation tax for the same accounting period, or
- set against future rental income from the same property.
Can our club claim expenses against its chargeable gains?
The allowable costs of acquiring and disposing of an asset are taken into account in working out the amount of any chargeable gain on which corporation tax may be due.
Allowances may also be due for both the effects of inflation and for expenditure which enhances the value of an asset. If an allowable loss is made, it can be carried forward and set against future chargeable gains.
For further information please see our leaflet CGT Introduction 'Capital gains tax. An introduction', or contact your own Tax Office.
What happens if our club pays interest on a loan?
If your club pays interest on a bank or other loan, the amount may be claimed as a deduction in working out the profits chargeable to corporation tax. This will depend on the purpose for which the loan was used. There is no tax relief for interest paid under a hire purchase agreement or on a bank overdraft, unless the club has trading income.
You can get more information from your own Tax Office.
Our club might be liable to pay corporation tax. What should we do next?
If you have not already done so, you must get in touch with your local Tax Office. They will be able to give you further help and advice on what to do. You may need to fill in a Form CT41G (Clubs). .
Which is our club's local Tax Office?
If your club has its own premises to which its post is delivered, its Tax Office is usually the one local to that address. Otherwise, its Tax Office is usually the one local to the private address of the club's treasurer or secretary.
If the club has charitable status, its Tax Office will be Financial Intermediaries and Claims Office (FICO).
Details of local Tax Offices can be found in your telephone book under 'HM Revenue & Customs'.
Will there be a lot of extra work for our treasurer/secretary if we have to fill in tax forms and pay tax?
This will depend on the amount and type of the income and expenses of your club. We give more information on the following pages about the corporation tax Self Assessment system which applies to all accounting periods ending on or after 1 July 1999. If you need information about an earlier period, please contact your Tax Office.
If your club is a flat or property management company, it may be liable to pay income tax at the rate applicable to trusts, and not corporation tax, on some of its investment income. For the income tax year 1999/2000 the rate applicable to trusts is 34%. If your club is in this category you must contact your Tax Office for more information.
If the people who legally control the running of your club or flat/property management company also have similar control over other clubs or companies, it is possible that they may all be treated as associated clubs or companies for tax purposes. If this situation is likely to apply to your club, you must contact your Tax Office for further advice, because the tax calculation could be affected.
Corporation Tax Self Assessment (CTSA)
How often will our club have to complete a tax form?
If your club is liable to pay tax, you must complete a company tax return (form CT600) every year. This will be sent to you with a notice about completing it, about one month after the end of your club's accounting period. If you have told us that an agent is acting for your club, we will only send the notice to you. This will remind you that it is time to fill in the company tax return. Your agent will have either already received a supply of the company tax return forms from us, or have an approved substitute version which can be used instead, but it is still your responsibility to make sure that your club's tax return is completed on time.
When does our club have to send the form back and pay the tax due?
Under CTSA, you must pay any corporation tax due not later than nine months and one day after the end of your club's accounting period.
You must also send your club's completed company tax return and a copy of the accounts to your Tax Office within 12 months of the end of the accounting period.
The company tax return includes the Self Assessment calculation which must be completed in every case. Unlike income tax Self Assessment for individuals, there is no facility under CTSA for the HM Revenue & Customs to work out the amount of tax due for you.
Once the return has been made, it creates the charge to corporation tax based on your club's own calculation. This calculation is final unless
- you amend it o we correct any obvious errors or omissions
- we start an enquiry into the return
There are also two other situations when the Self Assessment can be revised, but it is most unlikely that these will ever apply to a club.
There are also time limits for you to amend the original calculation, and this is usually 12 months after the statutory filing date, i.e. 24 months after the end of your club's accounting period.
If you want any further information about amending your calculation, the HM Revenue & Customs's powers to make enquiries, or the time limits, please ask your Tax Office.
What happens if we send the company tax return back late or if we pay the tax late?
If you send back your club's company tax return late, we may charge a penalty, and if you pay the tax late, we may charge interest. Equally, if you pay tax early you may be entitled to receive interest, and if you pay too much tax we will repay that amount with interest.
What are the amounts of penalties?
Penalties start at £100 and can increase to £1,000 plus 20% of any tax you pay late, depending on the lateness of the filing of the company tax return. The penalties are fixed by law, but if your club has a reasonable excuse for filing late we may not charge them. If you believe this to be the case, you should give full details to your Tax Office and file the return as soon as you can.
How can we work out the amount of tax due on our club's income?
The CT600 company tax return will help you work out the amount of any tax due or any tax overpaid.
You should use the CT600 guide issued with the return form to help you fill it in. You will also find more help and an example showing how to fill in the three pages of the company tax return which apply to most clubs.
What do we do with tax that we deduct from payments that our club makes?
If your club
- pays interest other than on a bank loan or hire purchase agreement (such as a private loan or an advance from a brewery), or
- makes covenanted or certain annual payments, or
- pays rent to an overseas landlord
you will most likely be required to deduct income tax from the payments which you make. You must tell your Tax Office if you are in this position.
Special return forms (CT61) will then be issued to you for each calendar quarter ending 31 March, 30 June, 30 September and 31 December, which must be completed and returned within 14 days of these dates, together with any tax deducted. You will also be required to make a return up to the end of your club's accounting period if that does not coincide with one of the quarter days.
It is important that these returns and the payment of tax are made on time, because we may charge interest if you pay the tax late.
What do we do if our club pays wages or honorariums to part-time employees or casual workers?
If your club employs someone, such as a secretary, steward or cleaner, you may have to deduct income tax and National Insurance contributions from their pay under the Pay As You Earn (PAYE) procedure.
Remember
- tell your Tax Office about any changes when they happen which might affect your club's tax position. If you do not do this, your club may pay more tax than it should or find that it owes tax
- this guidance does do not cover every aspect about clubs and tax, but if you have any questions, your local HMRC Enquiry Centre or Tax Office will be pleased to give you any help you need.
How to complete the company tax return
Most clubs will only have to fill in page 1 of the return which is the summary and declaration, and pages 4 and 5 which include the short calculation. Additionally, page 2 has to be completed by clubs which are trading. The remaining pages are for the detailed calculations of larger companies.
In the examples below we show the three relevant pages of the return, and how to fill them in for the following example, which is for a fictitious club called 'The Village Association'.
During its accounting year ended on 5 April 2000, The Village Association has received
- gross bank interest of £800 (that is, with no tax taken off by the bank)
- net building society interest of £240 (that is, £300 less tax of £60 (20%) taken off by the building society) income from property of £500 after allowing expenses (such as repairs).
The Village Association will have to pay corporation tax due on
- bank interest of £800
- building society interest of £300*
- income from property of £500 Total profits £1,600.
Corporation tax due
| financial year 1999 to 31/3/2000 £1,600 x 361/366 = £1,579 x 20% = £315.80** |
| financial year 2000 to 5 /4/2000 £1,600 x 5/366 = £21 x 10% = £2.10** |
| £317.90 |
| Less tax taken off the building society interest £60.00* |
| Corporation tax to pay £257.90*** |
*Although tax has been taken off the building society interest, you must still include the gross amount in the first part of the calculation.
**Because The Village Association's accounting year ends on 5 April, it does not coincide with the corporation tax financial year which ends on 31 March. The profits have to be apportioned on a daily basis between the two financial years. The calculation also includes an extra day because 2000 is a leap year.
***The Village Association must pay the total corporation tax due of £257.90 by 6 January 2001, and send in the company tax return to its Tax Office by 5 April 2001, otherwise we may add interest and penalties to the bill.
Page 1 of the return. Summary and declaration. This contains general information about the club, the summary of the return and the declaration. You must always complete this page.
Page 3 of the return. Section 2: turnover of the club.
If, exceptionally, the club is carrying on a trade you must complete this section. page 4 of the return. Section 3: the short calculation. (See the example below)
You must enter in box 7 the total of all bank and building society interest received.
Although tax has already been taken off the building society interest, the gross amount must still be included. The figure to be entered is £1,100 which is the total of the gross bank interest received of £800 and the gross building society interest received of £300. Credit for the £60 tax taken off by the building society will be claimed later in box 69.
The income from property of £500 is entered in box 12
The total gross profits of The Village Association (£1,600) are entered in box 19, and because there are no deductions to be claimed, the same figure will appear again in boxes 30 and 33. This figure should also be carried forward to the first box at the top of page 5.
Page 5 of the return. Section 3: the short calculation continued (see the example below)
Boxes 35,36,37 and 38 must always be completed even though it is most unlikely that a club will have any associated clubs or companies. This situation may apply more to flat or property management companies. If your club is one of two or more clubs which are controlled by the same group of people, ask your Tax Office for advice.
The Village Association is liable to pay tax at the small companies rate of 20% on the apportioned profits of £1,579 (£1,600 x 361/366 ) which relate to the financial year 1999 (1 April 1999 to 31 March 2000). This part of the calculation is entered in boxes 39 to 42 inclusive.
The balance of the profits of £21 (£1,600 x 5/366) which fall in the financial year 2000 (1 April 2000 to 31 March 2001) will be charged at the new rate of 10%. This part of the calculation is entered in boxes 49 to 52 inclusive.
The figure of tax chargeable in box 59 is the total of boxes 42 and 52. This amount should also be entered in box 68.
Credit for the £60 tax taken off by the building society is claimed in box 69. The net balance of £257.90 (box 68 minus box 69) which represents the amount of tax payable for the accounting period by The Village Association, is entered in box 72.
If The Village Association paid any tax before the completed return was sent to the Tax Office, the amount paid should be entered in box 75. This amount is then deducted from the figure in box 72, and the difference is entered in box 76.
In our example, no tax was paid before the completed return was sent to the Tax Office and the figure of £257.90 in box 72 will also be shown in box 76 as the tax outstanding.
This is the amount The Village Association must pay to the HM Revenue & Customs by the due date of 6 January 2001.
These entries are for a straightforward example, and more help can be found in the CT600 guide which is issued with the company tax return. If you have any problems in completing your club's return form, your local HM Revenue & Customs Enquiry Centre or Tax Office will be able to help you.
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