Investment tax reliefs

There are three tax reliefs relevant to sports clubs seeking finance. All work on the same principle – a person eligible for tax relief makes an investment eligible for tax relief in an organisation eligible for tax relief

Clubs can seek Advance Assurance from HMRC that investment in the club is eligible for a tax relief, which can give confidence to potential investors and incentivise them to invest more.

Investors who receive the reliefs are able to claim a percentage of the amount they’ve just invested against their income tax liability.

So, if you had someone invest £500 in community shares in your club, they will be able to reduce their income tax bill by £150 if the shares were eligible for Social Investment Tax Relief.

Clubs can seek Advance Assurance from HMRC that investment in the club is eligible for a tax relief

Alternatively, rather than getting them to feel better at having given you £500 by the thought of getting £150 back from HMRC, you could use it to incentivise them to invest more.

For example, had someone already committed to invest £500, they can invest £714 for the same net cash loss to them after tax reliefs kick in; they wouldn’t have spent a penny more investing the extra amount, but the club would have gotten 42% more.

Some things to think about:

  • Tax reliefs have been difficult to claim via PAYE but tax codes can now be provided. At present, it tends to be a tool to motivate High Net Worth Individuals who might have significant tax liabilities. That said, those same individuals are also the likeliest candidates to invest significantly in your club and indeed might already be sponsors or benefactors.
  • Tax reliefs require all the conditions in place at the start of the investment to be in place for at least three years. If the club inadvertently changes significantly in that time and becomes an ineligible body, HMRC can reclaim the tax relief already awarded, so cubs have a responsibility to follow through on their commitments for three years.