The taxation of coronavirus grants to grassroots sports

Tax Covid ()

This article, written by our tax adviser, Richard Baldwin MBE, provides an overview of the tax treatment of coronavirus business support grants provided to grassroots sports organisations. It does not cover the tax treatment of earnings support payments such as the Coronavirus Job Retention Scheme and the Self-Employed Income Support Scheme.

Government has continued to provide much needed financial support to grassroots sports clubs and organisations during successive lockdowns and restrictions due to the coronavirus pandemic.

This includes grants made under the Small Business Grant Fund, the Retail, Hospitality and Leisure Grant Fund, Restart Grants and Local Authority Discretionary Grants (and equivalent schemes in Scotland, Wales and Northern Ireland).

Legislation was introduced last year in the Finance Act 2020 to tax these business support grants. Following this, HMRC published its detailed guidance on these new tax rules. The guidance is quite general in scope and in particular does not address the special corporation tax rules which apply to members sports clubs.

HMRC’s overall position is that these grants are fully taxable whether or not a club has been liable to corporation tax in the past and filed returns. The only possible exceptions are:

  1. If the club is a mutual trader for tax purposes and then only if it has no other business income e.g. from renting its facilities, in which case only part of the grant will be taxable.
  2. If the club is registered as a Community Amateur Sports Club or charity and is within the relevant corporation tax exemptions for property or trading income.

Where the grant is taxable, deductions will be available for deductible expenditure which may reduce the taxable amount of the grant. The position is however not straightforward.

Following HMRC’s guidance, those clubs which have had no taxable income and have not needed to file corporation tax returns in the past are now likely to be required to do so if they have received any coronavirus support grants. Tax returns are likely to be required for more than one financial year given that grants may have been received in multiple accounting years (2019/20,2020/21 and 2021/22).

All grassroots sports clubs in receipt of coronavirus support grants (or indeed other grants such as from Sport England or the Summer and Winter Survival Package which may have a tax impact) should review their corporation tax position now and seek further professional advice where necessary.