Charitable Status for Chess Clubs

[John Upham]

Now is the season for AGMs and other dull meetings.

I am bringing up under AOB the news that Chess Clubs may apply for charitable status
(http://www.englishchess.org.uk/organisa ... _may08.htm)

I want to put forward the pros and cons of doing this but don't know what they are and the above does not enlighten.

Any knowledgeable persons out who can shed some light?

Many thanks for your help!

[David Robertson]

In my (semi-knowledgable) opinion, this will have minimal practical implications for the vast majority of chess clubs. One would need to register as a charity with the Charity Commission, not in itself difficult, but having little point unless the club's income and assets need to be protected from tax. The Charity Commission obliges registered charities in certain ways, not least in the presentation of audited annual accounts. Since most chess clubs have scant income, and exist largely on a hand-to-mouth basis, little of this is a benefit. Exemption arrangements do exist for small undertakings of this nature when the possession of a registered charity number might be an advantage in attracting sponsorship, donations etc.

The principal benefit for all sports clubs, including chess clubs, is that the principle of charitable benefit has been relaxed to allow clubs charitable status while admitting only those meeting club conditions (ie ability to play chess etc). Hitherto, a charity could exclude no one. For larger [amateur] sports clubs, charitable status will provide a useful shelter from taxation

David
Atticus CC

[Dr Andrew Cula]

Pros

• Little Practical Benefit
• Plenty of Scope for Argument
• Unintended Consequences in future years

Perfect AGM fodder.

[Matthew Turner]

Like David I can see very little advantage in 99% of chess clubs applying for charitable status. An important exception might be if a (rich) individual wished to run a (professional) 4NCL side. As I understand it, if a club had charitable status, the individual would be able to apply for Gift Aid when donating to the team. I would assume that with the sums involved in running the Guildford team for example the benefits of Gift Aid would be quite considerable.

[Matthew Turner]

An interesting scenario is a club has charitable status and I agree to play for them in the league. I donate £100 to club funds and Gift Aid takes this to £128. The club then pays me £128 appearance fee. I am not even sure that this is illegal! but I do know that not dissimilar situations occur in other European countries.

[Roger de Coverly]

if a club had charitable status, the individual would be able to apply for Gift Aid when donating to the team.

I believe this is correct - but I don't think Gift aid is allowed for regular subs. If it was, this would be a major financial incentive for charitable status.

I would assume that with the sums involved in running the Guildford team for example the benefits of Gift Aid would be quite considerable.

Part of the council debate about Chess Centre Limited was that you couldn't both be a charity and make payments to professional players. So the ECF would have to split into two if it became a charity. A commercial non-charity arm would pay fees and prizes for the British Championships and the international teams.

[David Robertson]

The example cited by Matthew would be unlawful, in my opinion - and in the opinion of m'learned friends too, I think. A chess club would be registered as a CASC (Community Amateur Sports Club), able to pay a club professional only for coaching and similar general activities, but not specifically for playing. That of course provides the loop hole. But HMRC (revenues & customs mob) would likely take a dim view of attempts to use Gift Aid to pay players.

Club subs are absolutely banned in law from being treated as Gift Aid. Indeed, HMRC could intervene where a club abolished its subs and invited players to Gift Aid instead. But there's plenty of room for 'enterprise' here. My club's subs are £30/£10 (waged/unwaged). Say we charged everyone £10 subs but invited Gift Aid from the waged. Then do the sums:

2007-08

£30 x 30 (= £900) + £10 x 20 = £1100 annual fee income

2008-09

£10 x 50 (= £500) + £600 Gift Aid (30 x £20) @ 28p/£1 = £1268 annual income

That's c. 15% growth; or the equivalent of 4/5 DGT clocks

Or we raise Gift Aid of £100 x 30 (= £3000 + £840), but award 30 prizes of £80 in carefully structured club tournaments

In fact, the more I think, the more I realise we could do things better. My colleague and I, at our own expense last year, renewed our club's entire equipment (16 new DGT clocks, 30 new sets & boards). Had we waited a year, then donated cash under Gift Aid instead, our club would be 28% better off

David
Atticus CC

[Matthew Turner]

I appreciate I didn't give a very good example, it was merely intended as David has appreciated to show how the system can work (or be worked). If a club had a turnover of £1000 then I doubt it would be worth the hassle to try and work the system, producing detailed accounts for example. Also remember that it is only higher rate taxpayers who can make full of Gift Aid (at the 28% level).
I don't though see why there should be any objection to paying professional chessplayers from Gift Aid. After all, if I give money to Cancer Research, presumably a lot of the money will go to professional doctors.

[Roger de Coverly]

For some light reading on CASCs , try here

http://www.hmrc.gov.uk/charities/casc.htm

re professional players

19. So, a club would be able to pay members for services such as coaching or ground maintenance as long as the conditions above were satisfied. We would not normally expect a CASC to pay members to play. However, some small payments to some members for playing may be acceptable as long as the object of paying players is to encourage wider participation in the sport. A club which pays players simply to achieve competitive success will not meet the qualifying criteria.

Remember this is sports clubs in the physical sense - however could you pay Matthew to polish the boards under the ground maintenance clause ?

On subs

Individuals can make gifts to registered CASCs using the Gift Aid scheme. The CASC will then be able to reclaim basic rate tax on the gift (at present 28p for each £1 given.) Membership subscriptions paid to registered CASCs are not eligible as Gift Aid payments.

[Matthew Turner]

Roger, Thanks for the info - I have my Mr. Sheen at the ready

[David Robertson]

Money 'gift-aided' to Cancer Relief and similar charities will indeed, and hopefully, go to doctors and medical researchers to deal with cancer. That is what doctors et al are paid to do - help anyone in need. Grandmasters, unless they coach or similar, merely help themselves. Hence, the Charity Commission and HMRC take a dim view. Sensibly.

David
Atticus CC

[Neill Cooper]

The Charity Commission obliges registered charities in certain ways, not least in the presentation of audited annual accounts.

From this year audited accounts are no longer required for smaller charities (turning over of a few thousand a year). The change made it much easier for the music charity I'm treasurer of.

[John Philpott]

Neil Cooper wrote
From this year audited accounts are no longer required for smaller charities

This is not such a recent development. For several years Charities have been divided into the large (requiring a professional audit), the standard (requiring an independent examination) and the very small (requiring no form of independent verification). The Friends of the William Morris Gallery, of which I am the Treasurer, changed its constitution something like a decade ago to provide for an independent examination rather than an audit.

[Matthew Turner]

Once you say chess clubs are charities alongside the Cancer Research Foundation then the two organisations are on an equal footing and I don't really see the LEGAL difference between a thesis on the use of Bortzamib in treating Multiple Myeloma and a game of chess with a novelty on move 18 of the King's Indian. However, I don't think it really matters because once you establish that people can be paid for coaching out of Gift Aid money then you can effectively pay anbody for anything. If you want Smada to play top board for your team, it is easy to say that he is helping out with the juniors.
I am not saying that this situation is morally right, but I am just trying to explain what I believe the situation de facto is.

[David Robertson]

The principal difference between a doctor and a professional chessplayer is determined, as far as charity law is concerned, by the beneficiaries of, not by the payment for, the work undertaken. A doctor treats anyone within his/her competence; a chessplayer benefits no one by playing, least of all an opponent A charity means exactly that: caritas, the greatest love for all - as distinct from self-interest. Hence, the law shelters from taxation (levied on self-interest for the public good) those acts and associations that are unambiguously for the public good. Coaching chessplayers is a public good; GMs should do more of it

This is not my opinion; these are the facts in law as I understand them.

David
Atticus CC