Corporation Tax Rules For Grassroots Sport

The corporation tax rules are extended to allow relief for contributions towards grassroots sport. The new rules apply for the purpose of allowing deductions for payments made on or after 1 April 2017.

A payment made by a company which is qualifying expenditure on grassroots sport (and which is not refunded) is allowed as a deduction from the company's total profits in calculating the corporation tax chargeable for the accounting period in which the payment is made.

The deduction is from the company's total profits for the accounting period after any other relief from corporation tax other than:

• relief under Part 6 CTA 2010 (charitable donations relief);
• group relief; and
• group relief for carried-forward losses.

If the company is a sport governing body per s217C CTA 2010 (to be implemented by regulation) at the time of the payment, a deduction is allowed for the amount of the payment.

If the company is not a sport governing body at the time of the payment, a deduction is allowed as follows:

• If the total of all the direct payments made by the company in the accounting period is equal to or less than the maximum deduction for direct payments, a deduction is allowed for that amount.
• If the total of all the direct payments made by the company in the accounting period is more than the maximum deduction for direct payments, a deduction is allowed up to that limit.

The maximum deduction for direct payments is £2,500 or, if the accounting period is shorter than 12 months, a proportionately reduced amount.

If at any time on or after 1 April 2017 the company receives income for use for charitable purposes which are exclusively purposes for facilitating participation in amateur eligible sport, the amount of the deduction is reduced by the amount of that income which the company does not have to bring into account for corporation tax purposes and has not previously been taken into account under these rules to reduce the amount of a deduction allowed.

However, the amount of the deduction is limited to the amount that reduces the company's taxable total profits for the accounting period to nil.

Meaning of qualifying expenditure on grassroots sport

A payment is qualifying expenditure on grassroots sport if it is expenditure incurred for charitable purposes which are purposes for facilitating participation in amateur eligible sport and, apart from the new rules, no deduction from total profits would be allowed in respect of the payment.

Paying a person to play or take part in a sport does not facilitate participation in amateur sport but paying coaches or officials for their services may do so. An 'eligible sport' means a sport that is an eligible sport under s661 CTA 2010.