Balfour+Manson LLP: Charitable status of sports clubs08/24/2012

What is the charity status of Sports Clubs? 

John Hodge, Head of the Charities team at Balfour+Manson, looks at a few points to consider if you are thinking about setting up or involved in the management of a sports club.

With the huge success of London 2012, major sporting events like the Olympics can be a springboard for many to become involved in a particular sport or club. It is likely that post the Olympics we may see a flurry of sports clubs being set up after inspirational performances from Mo Farah, Jessica Ennis and Sir Chris Hoy to name a few and much talk of a lasting legacy. If you or someone you know is considering setting up a sports club or involved in the management of one, there a few things that are worth considering.

Many sports clubs are formed as voluntary organisations with a constitution. While the Scottish Law Commission has been looking into the status of unincorporated bodies with a view to recommending changes, at the moment such clubs do not have any legal status. Therefore all contracts are entered into on their behalf by the Office Bearers. In certain circumstances this could lead to the Office Bearers having personal liability for the contracts or for any actions of the Club. In our current litigious age this is something that is obviously of concern. Sports clubs and others should consider their status and the potential liability of their office bearers. There are various options open to them. One is incorporating as a company limited by guarantee. A company limited by guarantee is not necessarily charitable but it is possible for it to apply for charitable status. The modern legislation includes as a charitable purpose “the advancement of public participation in sport”. In practice a club would have to show that it was not only open to the elite athletes but also encouraged those of differing abilities to participate. Charitable status has the advantage that there is tax relief is awarded and also gifts can be enhanced with the inclusion of gift aid. There is however further regulation and one has to make certain that personal benefit of the Office Bearers is limited. Technically it would also be possible to incorporate as a Scottish Charitable Incorporated Organisation (SCIO). There are other issues with a SCIO which need consideration.

All well organised clubs should review their constitutional set up from time to time.

For further information on issues relating to Charity law, please contact John Hodge.