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House adjourned at five minutes past four o'clock to Monday, 21 February.
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Official Report of the Grand Committee on the
Charities Bill [HL]
The Committee met at two of the clock.
[The Deputy Chairman of Committees (Baroness Hooper) in the Chair.]
Clause 5 [Special provisions about recreational charities, sports clubs etc.]:
Lord Hodgson of Astley Abbotts moved Amendment No. 31:
The noble Lord said: We move now to Clause 5. In doing so, I welcome back the Minister to the seat of power for the afternoon. Clause 5 deals with special provisions about recreational charities and sports clubs. We seek to remove subsection (4), on a probing basis, because we would like to tease out the Government's thinking on this matter.
Subsection (4) refers to community amateur sports clubs—CASCs—which have come up already in our discussions in Committee. These were created by the Finance Act 2002. The details are in Schedule 18 to that Act. Sporting organisations that fall within the parameters set by the Finance Act can register with the Inland Revenue and, in consequence, receive certain tax concessions.
As we learnt in our earlier debate, Clause 2(2)(g) provides that the advancement of amateur sport is a charitable purpose. Under English law, an organisation is a charity if it is established for exclusively charitable purposes. In theory, an amateur sports organisation registered with the Inland Revenue as a CASC could also be a charity under the "advancement of amateur sport" heading. As a charity, such a CASC would be obliged to comply with charity law. Probably, in most cases, it would be obliged to register with and be registered by the Charity Commission.
By saying that CASCs established for charitable purposes are not to be treated as being so established, Clause 5(4) seeks to draw a clear dividing line between CASCs and charities and ensure that CASCs do not find themselves subject to charity law and regulation.
If I am right in my assumptions so far, perhaps I may ask the Minister three questions. First, is the purpose of this clause to force sports clubs down one of the two routes; that is, to become either a CASC or a charity—they cannot be both? Secondly, if a sports club had gone down one route, could it subsequently change its mind and cross over to the other route? For example, a sports club chooses to become a CASC. It finds that it is offered a big donation if it is a charity, and
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therefore wants to switch its status from being a CASC to being a charity. There could be a tax advantage to a donor giving to a charity, which would probably not be available if the donation was given to a CASC.
Thirdly and perhaps least importantly, but it would be very interesting to hear the Minister's comments, what are the relative tax advantages of the two routes—between becoming a charity and becoming a CASC? I know that the noble Lord, Lord Phillips, has Amendment No. 31A in this group. I do not want to steal his thunder, but I think that his drafting is a great deal clearer than that in the Bill. I look forward to hearing his comments on it. I beg to move.
Lord Phillips of Sudbury: In speaking to Amendment No. 31A, I am grateful for what the noble Lord, Lord Hodgson, said in moving Amendment No. 31. Noble Lords may not be aware that as far as the noble Lord, Lord Bassam, and I are concerned, community amateur sports clubs have a rather special part in our parliamentary hearts. I set in motion the legislation that brought into being this group of quasi-charities, as I would call them. They are not quite charities but they enjoy most of the tax benefits of being charities, and now rating benefits as well. As a matter of pure charity law, if you are a charity, you are a charity. The fact that you have failed to register as such does not stop you being a charity, and you are still subject to charity law. In a sense that answers one of the noble Lord's questions.
I seek to clear up, in a way that has no unfortunate side effects, the issue to which subsection (4) is addressed; that is, to try to prevent a CASC being simultaneously a charity under the Charities Acts and charity laws. I rather hope that the noble Lord, Lord Bassam, will say that Amendment No. 31A does the trick because it heals both ways. Amendment No. 31A would make subsection (4) read:
"A registered sports club established for charitable purposes is to be treated as not being so established unless it has been entered on the Register of Charities"—
at the moment CASCs can, so to speak, transmogrify into charities—
That seems to me to leave the position clear: you either are a CASC and registered as such or you are a charity and registered as such. You cannot be both simultaneously.
Lord Swinfen: Purely on a matter of practicality, I do not understand why the Government when drafting this Bill put this subsection into it. Obviously, sports clubs, whether charitable or not, are to be encouraged for the health of the nation. There is a great outcry at the moment about obesity, particularly in children and the fact that they are unfit. Purely on the grounds of practicality it should be possible for sports clubs to have charitable status. They should be encouraged in every respect and not just for the sake of children but also for adults. All adults should be encouraged to keep fit.
Lord Bassam of Brighton: It might help the Committee if I give a little background, although I
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think that there is general understanding of why we introduced the CASC provision which the noble Lord, Lord Phillips, promoted in many respects.
The CASC scheme was devised by the Inland Revenue in 2002 and was promoted to small sports clubs as an alternative to charitable status. The scheme was meant to allow a sports club to be a CASC or a charity but not both. We are trying to iron out some of the flaws that have arisen in the construction of CASCs. That is essentially why we have this provision.
In general terms a sports club that is open to the whole community and is organised on an amateur basis can register with the Inland Revenue under the CASC scheme. As I said, that scheme dates back to 2002. It gives qualifying clubs many but not all of the reliefs that charities enjoy from direct taxes and from rates on their property, as the noble Lord, Lord Phillips, and I know very well. CASCs are overseen by the Inland Revenue for compliance with the rules of the CASC scheme. The Government believe that the CASC scheme has a lot of potential to encourage the formation and growth of small sports clubs and thus to increase participation in sport at grass-roots level.
Since the introduction of the CASC scheme, a number of sports clubs have also had to be registered with and be regulated by the Charity Commission due to their charitable purposes. Our intention is that CASC status should be a true alternative to charitable status for sports clubs, making it clear that a sports club cannot be a charity and a CASC at the same time. The drafting of the Bill seeks to achieve that; I think that it does. It enables those sports clubs to choose whether to register with the Inland Revenue under the CASC scheme or, instead, to register as a charity with, and be regulated by, the Charity Commission, and it allows them to convert from one to the other in either direction. That deals with the second question; there is the possibility of switching from one to the other, but you cannot be both.
The effect of the amendment would be to maintain the currently anomalous position. We cannot accept that; it would be inappropriate and wrong, which is why we cannot accept this probing amendment.
The noble Lord also asked about the tax position of charities vis-à-vis CASCs—bodies registered as a charity or a CASC. CASCS get many—perhaps most, but not all—of the tax exemptions available to charities under Section 505 of the Income and Corporation Taxes Act 1988. As I explained, CASCs receive rate relief on their property. Overall, there is probably not a lot to choose between CASCs and going through the charities route. If there is an advantage at all, it is probably slightly to charities registering with the Charity Commission. That is where the benefit lies.
The noble Lord, Lord Phillips, thought that his amendment might do the trick. I have a speaking note that covers some of the ground already covered in this short debate. The heading on the note originally said "resist", but we thought about it a little more and
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would like to take away his amendment to see whether we can come back with something that does what he seeks to achieve. We have taken some further advice and want to be helpful. The amendment tries to force CASCs that are already on the register to retain charitable status and lose their status as CASCs. We agree to consider that change to the Bill to try to ensure that there is a nice and simplified process for that to happen. I hope that the noble Lord will be satisfied with that.
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