There are two potential financial outlays for a club or coach when they are selected for a tax inspection – the possibility of having to pay backdated tax/penalties and the cost of using an accountant to represent the club/coach throughout the investigation.
The first can only be minimised by ensuring all tax affairs are in order. The cost of the accountant can be minimised through tax inspection insurance and should not be underestimated – a recent investigation for a sports club in the north of England resulted in a bill from their accountants of over £4,000 for representing the club during the seven months the investigation lasted. The club were offered tax inspection insurance by the accountancy firm but decided that the £165 cost they were quoted was money they could save.
Someone who decides to volunteer at their sports club should NOT have to take out insurance in case they have an accident or cause an accident to a third party whilst volunteering.
We have seen a number of insurance brokers promoting such cover and there is no real evidence that we or Volunteering representative groups have seen that suggests this cover is needed.
We work with numerous clubs and coaches to help them develop an effective marketing plan and there are some basics that everyone should have in place to enable them to effectively monitor whether what they are doing works.
The most important of these is calculating and monitoring your retention rate, a key measure of how good are you are keeping your members/customers.
This is the time of year that most clubs start to plan their summer programme of coaching and club activities and it is therefore a perfect time to ensure that any self-employed coaches you use in delivering your programme are truly self-employed, i.e. they would pass scrutiny by HMRC (tax authorities) should they decide to investigate.
There are three ways that a club can work with a self-employed coach to ensure they would pass inspection by HMRC. Each will require a contract of services to be in place between the club and the coach outlining the actual working arrangements.
We regularly visit clubs where they are relying on substitution as the way in which their coach is truly self-employed with them, but where the coach has never actually substituted.
It is important to note that a coach who has never actually substituted may not actually pass HMRC scrutiny for self-employment status – HMRC would expect to see evidence that the coach HAS substituted in the past and that subsequent payment to the substitute coach was made by the coach and not the client (club).
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We get asked this question regularly by self-employed coaches and the answer is usually no. Travel from home to your ‘principal place of work’ is not an allowable expense so this will mean that a coach principally working at one club or venue will not usually be able to claim travel to the club/venue as an allowable expense.
A coach could argue that their business base is their home, i.e. their principal place of work, because their home office is where they carry out their business administration, produce lesson plans, telephone and email customers, etc. This will almost certainly be challenged by HMRC if the hours spent in the ‘home office’ are insignificant or where the coach is unable to convince HMRC as to the work carried out.
A not for profit sports club should ensure that has a constitution that clearly states that it is a not for profit organisation and should include a clause similar to the following to confirm that no profit/surplus is distributed to individual members:
The income and property of the Club shall be applied solely towards the promotion of the club and no portion thereof shall be paid or transferred directly or indirectly, overtly or covertly by way of distribution, bonus or otherwise by way of profit to the members of the Club or third parties other than other registered community amateur sports clubs or charities. No member shall be paid a salary, bonus fee or other remuneration for playing for the Club.
It is not illegal for someone with no accounting qualifications to call themselves an accountant so it is important to ensure that you check how qualified your accountant is before they work on your bookkeeping/accounts.
A recent survey revealed that less than 10% of organisations/individuals actually check the qualifications of their accountant, usually because they wrongly assume that you have to have qualifications to call yourself an accountant.
We come across a lot of clubs and coaches who assume that they won’t have any problems with the tax authorities (HMRC) because the amounts of money involved are so small, and therefore HMRC just won’t be interested.
There is some truth in this – HMRC will not generally dedicate resources to investigate clubs or coaches if the amounts involved are insignificant but that does not mean they won’t take action if they find out about any issues or discrepancies.