Tax on income from parking - private club

[Ganglandboss]

I am a member of a diving club and I sit on the committee as the building manager. We are based in a clubhouse which is quite a size; the ground floor has three garage bays large enough to house three 6 metre RHIBs, with even more space either end for equipment and bogs. Upstairs we have a large function room, with kitchen, bar and training room. All of this is owned outright by the club with no mortgages.

The club is privately owned by the collective membership, with the usual trustees, committee, rule book etc; we employ no staff and nobody makes a profit or any form of payment. The club policy has always been to maintain a surplus of around £10,000, which is roughly equivalent to a year's running costs, but at the moment, we have around £25,000.

In the past we have received grants from various charitable funds and the local authority. We do certain community outreach activities, but we are not a charity.

The club was built by the members about 30 years ago. Prior to this, they used to lease space in a couple of industrial buildings. These were cleared to make way for a new bypass and the land was bought by the Highways Agency. The surplus land was then sold, and the club bought a plot for the new clubhouse.

The committee, shortly before I joined, became aware we did not own title to the space we have always used as a car park, and even a small part of the land the building sits on, amounting to the end trap in the ladies bogs. Over the past couple of years, we have had a solicitor working on it and we now have title to all our land.

A short while ago, we received a letter from a local business, who are looking to rent parking spaces for staff. The chairman initially asked for our views and suggested we refuse, but the committee's view was that we should consider it. We agreed to hold off until the land issue was resolved, mainly as we probably cannot charge people to park on land we do not have title to.

Now this has been resolved, we can start looking into the matter. Somebody has raised the question of whether tax would be owed on the rent money. Any income would go into club funds, and is then likely to get spent on either equipment or building improvements. We are potentially looking at an income of around £10,000 a year. Can anybody advise on our tax position.

[Eric Mc]

Clubs are liable to Corporation Tax on any surpluses they make. However, they can apply for exemption from Corporation Tax from these surpluses on the grounds that the profits are re-invested for the benefit of the club and not its members.

[Ganglandboss]

Eric Mc said:

Clubs are liable to Corporation Tax on any surpluses they make. However, they can apply for exemption from Corporation Tax from these surpluses on the grounds that the profits are re-invested for the benefit of the club and not its members.

Thanks Eric. Is there any sort of limit or definition of a surplus? As I say in my post, we currently have £25,000, which is held in a deposit account, but it is there to be spent should we need to, and will always be invested into the club.

I have my eyes on this money; the car park surface is a mess, so I want to resurface it. I would also like to upgrade the external lighting and CCTV. Next year I want to install heat pumps, so I can easily shift a chunk of this income before the equipment officer gets his hands on all of it...

[Eric Mc]

Surplus for tax purposes would be the annual "profit" when expenses are deducted from income.

If a club made an annual surplus of (say) £10,000, they would be liable to a Corporation Tax charge of £1,900. However, by applying to HMRC they could get an exemption from having to submit Corporation Tax returns and paying Corporation Tax.

[anonymous-user]

Eric Mc said:

Surplus for tax purposes would be the annual "profit" when expenses are deducted from income.

If a club made an annual surplus of (say) £10,000, they would be liable to a Corporation Tax charge of £1,900. However, by applying to HMRC they could get an exemption from having to submit Corporation Tax returns and paying Corporation Tax.

Interesting and useful answer.

[Ganglandboss]

Thanks again, Eric.

I have found the following: https://www.gov.uk/government/publications/communi...

According to that, we only have to send in a corporation tax return if we are asked to by HMRC, or we have corporation tax to pay.

According to the following text, it appears we are exempt:

HMRC said:

2.1 Where a club is a CASC for all its accounting period and its turnover from trading is not more than the limit of £50,000, the whole of the profit from that turnover is exempt provided it is applied for qualifying purposes. If the limit is exceeded there is no marginal relief available and the whole of the profit will be subject to Corporation Tax.

I have taken a look at the accounts presented at the last committee meeting. Our income to date in the current accounting period (1st Jan to 31st Dec) is less than £20,000. Of that, just over £12,000 is membership fees, which the web link says does not count towards trading income. By my estimation, we will not exceed £10,000 this year in trading income. Assuming it is the same next year, and we get an extra £10,000 from parking, am I correct in saying we do not have to do anything, as we are well within the £50,000 limit?

ETA: I should probably add, the £10,000 / £25,000 'surplus' is probably not the best word; it is money we have in the bank in reserve, and has been accrued over a period of several years.

Edited by Ganglandboss on Sunday 18th November 21:27

[48k]

Not immediately relevant to your question but - do you have a means of securing the car park and ensuring that only valid users make use of it? Will the car park be shared with club members? If so, do you have a way of ensuring that the company renting spaces only utilise their quota of spaces so that club members have spaces avalable to them ?

[Eric Mc]

Ganglandboss said:

I have taken a look at the accounts presented at the last committee meeting. Our income to date in the current accounting period (1st Jan to 31st Dec) is less than £20,000. Of that, just over £12,000 is membership fees, which the web link says does not count towards trading income. By my estimation, we will not exceed £10,000 this year in trading income. Assuming it is the same next year, and we get an extra £10,000 from parking, am I correct in saying we do not have to do anything, as we are well within the £50,000 limit?

ETA: I should probably add, the £10,000 / £25,000 'surplus' is probably not the best word; it is money we have in the bank in reserve, and has been accrued over a period of several years.

Edited by Ganglandboss on Sunday 18th November 21:27

At least I pointed you in the right direction. Many years ago I had to handle an exemption claim for a hockey club and it involved writing to the Inland Revenue (as it then was) to ensure that they did not need to be submitting Corporation Tax returns or paying Corporation Tax. The Revenue also insisted that they be contacted every 5 years for a review of the situation.

[Ganglandboss]

48k said:

Not immediately relevant to your question but - do you have a means of securing the car park and ensuring that only valid users make use of it?

Yes, but it's crap.

Previously we used to put polite notices on windscreens, and they tend not to return. It is not a persistent problem, but on a few occasions, a badly parked car has caused us a massive problem getting the boat trailers in and out.

When people do park without permission, they seem to attract others; we suspect that if we allow people to park, others who haven't paid will join them too, so we do need a physical barrier.

The problem we have is the entrance at one end is really wide; this means it is difficult to close with a barrier. We don't want to make it narrower as the width helps when it comes to swinging in a trailer.

Recently, one of the committee members made a barrier. It comprises a chain of around 9 metres. The problem there is it is going to sag, so he has welded an axle stand in the middle. The second problem is some idiot is going to drip on it or drive into it and blame us, so he has stuck a load of reflectors and fluorescent tape on it. It is really flimsy, looks crap, and it is a pain to fit and remove. Ideally I would like a short lift-up barrier or gate at one end with some removable bollards that can be taken out if we are moving the boats.

48k said:

Will the car park be shared with club members?

Not usually. The contracted spaces will be used during the daytime by staff working a typical 9 am to 5 pm. We have a club night once a week, where members can fill their cylinders and have a drink in the bar etc. This is around 8:30 pm to midnight. It is sometimes used at the weekend, say if there is a course on, or we have a work party. The problem with unauthorised parking isn't that it is depriving members of a parking space, it is more when somebody is taking or returning a boat and a car is stopping them swinging the trailer in or out. We currently think we can have 8-10 spaces that will not obstruct the trailers, but there is space for around 30 cars; if we needed to use the building during the day, there would still be enough space for us, but we might have to move cars.

48k said:

If so, do you have a way of ensuring that the company renting spaces only utilise their quota of spaces so that club members have spaces avalable to them ?

We will have marked bays; these are more to ensure the cars are parked in a manner that does not obstruct the trailers; as above, the spaces will be used outside our normal hours.

Edited by Ganglandboss on Monday 19th November 15:30