Where facilities are available to both members and non-members, only profits from non-members are taxable and it is essential to be able to identify the income from non-members as opposed to members.
When apportioning income and expenditure for a mutualtrade, HMRC will accept a split between members and non-members based upon the monitoring of takings for a sample period or periods.
Example: Members only bar/restaurant
Bob and Bill are both full members of their rugby club and after a match they use the bar and restaurant facilities.
Sometimes they sign in a personal guest, Fred, and pay his bar bill and the cost of his meal.
As Fred is a personal guest of the full members and they have paid his costs this would not be taxable, as it is mutual trading and therefore exempt.
Likewise, losses cannot be claimed if incurred in these circumstances.
Example: Mixed Income in a club bar/restaurant
Bob and Bill are both full members of their rugby club and after a match they use the bar and restaurant facilities.
Fred brings his brother in law Chris and his wife Sue to watch the game and they also join Bob and Bill for drinks and a meal.
Fred, has again been signed in as a personal guest of Bob and his costs are settled by Bob, but Chris and Sue are visiting guests and pay for their own refreshments.
In this case, Bob, Bill and Fred’s income is mutual trading and therefore exempt and Chris and Sue’s is taxable.
Catering
If provided by the club you will need to split both the income and the relevant expenditure between mutual (members) and non-mutual (non-members) attendees of the event.
If franchised out to a third party then the income will be non-mutual, and therefore taxable in full. Likewise, the cost of providing the catering would be deductible in full.
These guidance notes provide details of corporation tax which are relevant to community rugby clubs. It is written in general terms and cannot be relied upon to cover specific situations. Clubs are reminded that they should therefore seek their own independent professional advice. The notes have been prepared by Jerroms Business Solutions Ltd and is correct to the best of their knowledge and belief at 30th June 2017.The author takes no responsibility for any consequence of a user or club placing reliance on this guidance.
