Mr. Pound: We were a not-for-profit company, but we did not start out that way. We believed that profit was normally explicable in terms of surplus value, and something to be abjured.
Mr. Bacon: As ever I am grateful for the elucidation.
Mr. Burnett: Of course, they would have had terrible problems if they were a trading company. The hon. Gentleman will be aware of the principle of Sharkey v. Werner, appropriating trading stock to own use.
Mr. Bacon: I will not try your patience by exploring Sharkey and Werner any further, Mr. McWilliam, but
The Chairman: Order. If it was sunny, I would take the class outside in the sunshine, but it is not.
Mr. Bacon: It does not surprise me that something that the hon. Member for Ealing, North was involved in turned out not to be profitable.
The fact is that community amateur sports clubswhile they are plainly not, in all cases, charities, in many cases are, by definition, not charities, and in some cases are not eligible to apply to be charitiesare widely understood to be essentially philanthropic ventures that play a vital role in promoting health and exercise and have other benefits such as social inclusion. They are not, in essence, about money raising for withdrawal by members or shareholders but money raising for the purpose of continuing their activities.
In that context, although the clause raises the threshold, given that it is a turnover threshold it does not look quite so generous. If experience shows that the threshold is too low for trading purposes for organisations that are genuinely amateur clubs, will the Government consider raising that threshold to £50,000? That would align it with the limit that is generally available to charities in respect of non-primary purpose trading.
Secondly, I ask about take-up. The hon. Member for Torridge and West Devon referred earlier to the potential cost to the Treasury. As at the end of November 2003, only 529 clubsout of an estimated 150,000 such clubs in the UKhad registered as
Column Number: 195community amateur sports clubs. I understand that the Central Council for Physical Recreation is responsible for promoting the scheme. One might doubt how successful it has been in doing that. One of the tax partners at Deloitte and Touche put it thus:
John Healey: This has been a useful short debate. I think that it has demonstrated how wide are the associations that members of the Committee have with local and community sports organisations and how wide the range is of the sports that they are associated with.
Mr. Andrew Tyrie (Chichester) (Con): What does the Economic Secretary have to declare?
John Healey: From tomorrow evening, I hope to be forging a long association with Upper Haugh cricket club, where I hope that our nine-year-old son will take up the opportunity to start training and possibly even succeed in making the under-11 team for future matches.
Clause 56 extends the relief from corporation tax on trading and property income enjoyed by sports clubs registered with the Inland Revenue as community amateur sports clubs. In the Finance Act 2002, we introduced a broad package of reliefs for CASCs similar to the reliefs available to charities. It included gift aid on donations by individuals and corporation tax reliefs for the clubs themselves. The package was widely welcomed.
We continue to seek to improve the scheme where it is sensible to do so and last year introduced legislation to provide mandatory business rates relief of 80 per cent. for registered CASCs in England and Wales from 1 April 2004.
With this measure, we are doubling the corporation tax thresholds for registered CASCs. That means that CASCs will be exempt from corporation tax on profits derived from trading if their trading turnover is under £30,000 a year, and from corporation tax on profits derived from property if their gross property income is under £20,000.
The hon. Member for Torridge and West Devon asked about the cost
Mr. Burnett: Forgone.
John Healey: I understand the question. The hon. Gentleman asked about cost of the way in which we score tax. In our judgment, the cost counts as negligibleit is under £5 million a year. He expressed concern that the trading exemption may be too low. That probably will not be the case. Much of the income of most clubs is derived from their members. It lacks the required level of commerciality to be treated as trading income. The exemption threshold applies only to income derived from non-members and income derived from members that has a commercial nature.
Column Number: 196If the clubs in the hon. Gentleman's area have bar takings that push them comfortably over the £30,000 threshold, he has some successful and very vibrant local clubs, and I am very pleased to hear that, but generally CASCs do not have such bar takings.
Mr. Burnett: By a quirk of the law on charities, which might be being remedied in the draft Charities BillI am ashamed to say that I have not got my head around the draft Charities Bill yetsporting clubs, as the Economic Secretary knows, are not charities. If the cost is negligible in terms of public expenditure and tax forgone, will he consider being even more generous in next year's Budget? In order to ensure that they flourish, many clubs have bars and ancillary activities. Of course we are talking about trading income, if that is what people want to call it, but that money must be ploughed back into the club for the benefit of the community. The institutions are very worthy and I hope that the Economic Secretary will give the matter consideration for next year.
John Healey: I am very happy to take that as an early 2005 Budget representation. If the hon. Member for South Norfolk (Mr. Bacon) will allow me, I will treat his argument for a £50,000 threshold in exactly the same way.
The hon. Gentleman asked for an update on the process of registration for CASCs. As far as anyone can estimate, there are probably more than 100,000 local sports clubs and associations. We estimate that between 30,000 and 40,000 are eligible for registration as CASCs. To date, 3,960 have applied for registration.
Under the clause, clubs are not treated as trading when their main activity is providing sporting and ancillary facilities to their members. Therefore, that income will not be taken into account in establishing whether a club has a trading income above the £30,000 threshold.
The majority of registered CASCs will pay no corporation tax, and will be removed from the annual cycle of completing tax returns. The clause is another valuable measure for grass-roots sport. I am pleased to say that it has backing on both sides of the House, and I commend it to the Committee.
Mr. Burnett: I hoped that the Minister would answer my question about bank and building society interest. I should like to knowI apologise to the Committee, as I should already know thiswhether CASCs can invest in gross interest-yielding investments in banks and building societies, and whether, if they do, all such bank and building society interest would escape taxation.
John Healey: If the hon. Gentleman will allow me to do so, I will consider that point more closely and write to him with the relevant information.
Column Number: 197
Mr. Burnett: I am entirely satisfied with that response. Presumably, as with all such matters, any such letter will be circulated to all members of the Committee.
Question put and agreed to.
Clause 56 ordered to stand part of the Bill.
Clause 78 ordered to stand part of the Bill.
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