The case of Hutchinson & Co (Publishers) Ltd v Turner [1950]
31TC495 shows that the destination of any profits has no bearing on
their assessibility. Thus placing any or all of a surplus into a
fund for capital expenditure does not secure that the profits
remain untaxed.
A members’ club may seek to attract non-member custom
with a view to subsidising members. That non-members in effect
subsidise members is of no relevance. Buckley LJ in the Court of
Appeal in The Carlisle and Silloth Golf Club v Smith [1913] 6TC48
& 198 case dealt with this issue in the following terms (6TC at
page 200):
The fact that in the pocket of the club it [income from non-members] saves the pocket of the member by reducing in his favour the current expenditure which otherwise he would have to bear is not a material circumstance for the purpose of ascertaining whether the club as a society has made a profit or not.
In some cases the evidence may show that overall the
members’ club seeks to make little or no profit; any profit,
in the absence of some specific purpose, only contributing to a
reserve distributable to members.
The club may also wish to minimise individual members'
subscriptions. To that end the club may take steps to generate
income. One way of doing so is to offer the use of their
facilities, at commercial rates, to outsiders. Carlisle and Silloth
established that a profit made by a members' golf club from the
provision of its facilities to visitors in this way was chargeable
under Case I. This is so whether or not the club accounts show an
overall surplus.
For a detailed explanation of the so-called ‘rounds of
golf’ method of determining the allowable expenditure in the
case of a members’ golf club see
BIM24215.
