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Finance Act 2014

Example 1:

28.A company, owned and controlled by a CASC buys supplies from one CASC member and rents property from another. Both of the payments are more than what would be expected under an arm’s length arrangement. As a result CASC members benefit financially to the detriment of the company and its parent sports club.

29.In the Accounting Period Ended (APE) 31.01.16, the subsidiary incurred total costs of £37,500 and £12,500 for the supply of sporting equipment and rent, respectively.

30.In respect of the same APE the subsidiary made a qualifying gift of its entire net profit of £75,000 to the CASC.

31.Because neither of the arrangements was at arm’s length the value of the qualifying gift would be reduced by £50,000 (37,500 + £12,500).

32.Accordingly, the subsidiary would become liable to pay corporation tax in respect of an APE 31.01.16 profit of £50,000, rather than nil, despite the company donating its entire net profit to the CASC.

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