If a club is established by its members for their own social or
recreational objects, it is not liable to tax under Case I Schedule
D on any surpluses which arise from transactions with its full
members. This is because the surpluses on transactions with such
members are not trading income on the authority of Carlisle &
Silloth Golf Club v Smith 6TC48 and NALGO v Watkins 18TC499.
However, receipts from outsiders such as visitors or temporary
members are subject to the rules of Case I Schedule D (see
CTM40130). Other income and gains of
members' clubs are chargeable to tax in the normal way.
The same guidelines apply to a club incorporated with a share
capital (CIR v Eccentric Club Ltd 12TC657) provided it fulfils the
criteria set out in
CTM40115 to CTM40125 (see
CTM03670 onwards for claims to small
companies relief).
If the members' club pays interest on loans from brewery
companies, or other suppliers, it may need to account for tax under
ICTA88/SCH16. However, see
CTM35215 for periods on or after 1 April
2001. (See AP2300 where interest is paid by a club which is
incorporated as an industrial and provident society.) The club is
also liable to tax on interest it receives. Inspectors should bear
these points in mind when considering the liability of members'
clubs.
