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Finance Act 2014

Anti-abuse provisions

8.Subsection (7) inserts new Chapter 2A, which provides new anti-abuse provisions aimed at discouraging abuse of companies owned or controlled by CASCs.

9.New section 202B (1) (restriction on relief for payments to community amateur sports clubs) sets the conditions where the new anti-abuse provision would apply and introduces the concept of ‘inflated member-related expenditure’, which is defined at new section 202C.

10.Where a company, which is owned or controlled by a CASC, incurs inflated member-related expenditure, new section 202B (2) reduces (but not below nil) the amount of a qualifying payment by the company to its parent CASC that qualifies for tax relief. The amount of the reduction is the total amount of the inflated member-related expenditure or, if less, the amount of the qualifying payment. The effect of this provision is to bring back into the charge to corporation tax the amount of the inflated member-related expenditure.

11.New section 202B (3)-(7) deals with the situation where the amount of inflated member-related expenditure referred to in new section 202B (2) is greater than the qualifying payment made in the same accounting period. In that case any excess inflated member-related expenditure can be carried back to adjust qualifying payments in earlier years for up to six years. The excess expenditure is set off against qualifying payments made by the company starting from the latest year and working back.

12.The commencement provision at subsection (15) of section 1 prevents adjustments being made in accounting periods ending before the general commencement given by subsection (13).

13.New section 202B (8) to (11) provide a number of definitions for the purposes of new section 202B In particular new subsections (9) and (10) explains when a company is controlled by a club or two or more charities (including the club) for the purposes of the anti-abuse rule.

14.New section 202C (2) defines in paragraphs (a) and (b) the two situations in which expenditure incurred by a company is `inflated member-related expenditure`.

15.The situation in paragraph (a) is that expenditure on the employment of a member of the club by the company is not at arm’s length. New section 202C (7) enables HM Treasury to provide, by Order, what counts as ‘employment-related’ expenditure for this purpose.

16.The situation in paragraph (b) is that expenditure on the supply of goods and services to the club by a member or member-controlled body is not on an arm’s length basis.

17.New section 202C(3) provides that where the expenditure, taken as a whole, is beneficial to the company rather than to the third party then that expenditure will not fall within the definition of ‘inflated member-related expenditure’.

18.New section 202C (4) and (5) explain the meaning of `member-controlled` for the purpose of section 202C (2).

19.New section 202C (6) provides that a reference to a member of the club includes a reference to a person connected to a member.

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