Chapter BIM24215

Record NumberBIM24215
Published date22 November 2013
Members’ sports clubs

The subject of members’ clubs was discussed in an article in Tax Bulletin 32G, the text of which is now included below:

Background

In the past the taxation of members’ clubs has usually been a straightforward matter. However, the increasing commercialisation of sport, evidenced for example by substantial business sponsorship and media coverage of events, can generate a range of tax issues where the answers depend not on any specific statutory enactment but on the application of general principles developed by the courts. In particular, an issue that frequently arises in these circumstances is to what extent a club’s increasingly commercial activities can give rise to taxable trading profits or allowable trading losses. In this article we attempt to outline the way this question needs to be answered.

The types of clubs we consider

We are concerned here with members’ clubs constituted, for example, as unincorporated associations or as companies limited by guarantee. Whatever their constitution these clubs are all chargeable under the CT regime.

On the other hand, this article is not concerned with clubs which take the form of companies incorporated with limited liability and ordinary share capital under the Companies Act. Their trading profits do not normally come within the mutuality exemption described later in this article.

Members’ clubs come in all shapes and sizes

At one extreme there are small members’ clubs used only by the members who come together for the non-commercial purpose of providing themselves with the facilities to play and watch a sport or for other recreational purposes. Any surplus such clubs generate from their transactions with members is unlikely to amount to a trading profit (and nor is any deficit tax deductible). It is sometimes said that the surplus in these circumstances is exempt on grounds of mutuality. However there is a simpler prior point here. Such activities do not normally amount to a trade because they lack the necessary commercial inspiration.

At the other extreme there are far more commercial concerns whose principal function is to offer the general public entertainment in watching the clubs’ sporting activities as well as access to bar and catering facilities and so on. The whole of such a club’s activities are likely to amount to a taxable trade.

Increasingly many members’ clubs find themselves between these two extremes. For example, their primary purpose may remain non- commercial but...

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