ACCOUNTING & TAX
CORPORATION TAX MATTERS – NAVIGATING CHANGES IN 2021 The tax landscape for sports organisations continues to change; organisations that are not familiar with the new requirements may miss opportunities to claim valuable reliefs. Jamie Whale Senior Tax Manager at haysmacintyre covers some of the key changes and how your organisation can benefit from new reliefs. Increase in CT rate from 2023 The Chancellor announced at Budget 2021 that the Corporation Tax (CT) rate will increase from 19 per cent to 25 per cent with effect from 1 April 2023. All tax-paying companies, associations and clubs will be impacted by this increase, which is the first increase in the main rate of CT for almost 50 years. The existing rate of 19 per cent will remain for profits up to £50,000 so small income streams in entities that are otherwise tax exempt will be unaffected. Although the increase is effective in 2023, deferred tax disclosures will need to reflect the future tax rate from the date of substantive enactment of the Finance
or computer equipment, will be entitled to a 130 per cent tax deduction during the acquisition period. Integral features and other assets that ordinarily qualify for the ’special rate pool‘, such as expenditure on air conditioning systems and water systems of a building, will be entitled to a 50 per cent “first year allowance” tax deduction, with the remaining balance pooled to receive tax relief in future years as normal. The latter is of use to entities that already use their full Annual Investment Allowance –£1 million of expenditure per group per annum, until 1 January 2022 when it is scheduled to decrease to £200,000 per annum. The enhanced rates apply for two years from 1 April 2021, the end of each
“Many sports clubs consider their trading activities with members to be exempt from CT on the basis that the organisation is conducting mutual trading – that is trading transactions with your own members.” Bill, expected in July 2021. Therefore periods ending after this date will disclose deferred tax at the future rate. Super capital allowances The Chancellor also announced that super-deductions will be available for qualifying capital expenditures for taxpaying businesses. Qualifying plant and machinery, such as fixtures and fittings 52 | OTFF ISSUE 17 ★ OCTOBER 2021
change coinciding with the increase in CT rate – this removes any incentive to delay expenditure to obtain 25 per cent relief in future. Companies, associations and clubs that partly conduct taxable trading activity are required to reduce the level of all capital allowances claims to only make a percentage of the claim that is ’just and reasonable‘ – this means that assets
used in both taxable and exempt trading activities only receive a deduction based on the proportion used in its taxable trading activities. This means the benefit of these reliefs is reduced accordingly, though it is nevertheless a higher rate of relief than was previously available. Structures and buildings allowances (SBAs) SBAs can be claimed for expenditure on structures and buildings used for qualifying business purposes. SBAqualifying expenditure is expenditure on construction of new buildings, renovation or conversion of existing commercial buildings (and any incidental repairs), and any associated fees. It does not include expenditure on land, nor on residential buildings. The structure or building must be used in a qualifying trade ie trading activity conducted with a view to a profit, that would be taxable in the event of any profit arising. As for other capital allowances (see above) this means a further reduction is required wherever the building is only used partly in a taxable trade. This expenditure would not previously have been eligible for capital allowances. The rate of relief was increased to 3 per cent of expenditure per annum from 1 April 2020, having been initially set at 2 per cent per annum. Mutual trading Many sports clubs consider their trading activities with members to be
