"SavetheUKCC" petition

[Neil Graham]

There was a short discussion here http://www.ecforum.org.uk/viewtopic.php?t=530 some eight years ago.

Having read all this, I surmise no accounts have ever been submitted for the Chess Challenge, no-one knows if Mr.Basman has benefited financially from these events or what sponsorship money has been obtained or how it has been allocated. Whilst we all wring our hands and say "something must be done" is there anyone on this forum who actually knows anything about precisely how this event was organised? A petition is merely a sop - we can all sign it but it will not bring the tournament back.

[John Upham]

My understanding is that accounts were and have been submitted since 1996 and that Mike has discharged his Income Tax liability accordingly.

What has not happened is a VAT return of amounts charged and amounts claimed back for the "reason" that no VAT was levied in the services sold nor was any VAT claimed back for services rendered to UKCC.

For example, despite rather substantial annual printing costs Mike never attempted to claim back the VAT he would have paid for these and other services.

[Jonathan Bryant]

[what does taking over the UKCC actually mean?

I would imagine it would be trying to have an event run with a similar name and structure.

Sure. But that’s not taking over is it? Sounds more like replicating. I mean, I could start up the JBUKCC couldn’t I? I wouldn’t be taking anything over.

Earlier in the thread, it was suggested that the ECF's Junior Director wanted the event to continue.

It’s a very long way between "I want this event to continue" and "I intend to run it myself". Even further to "I want the ECF to run it"



I’m not against the ECF running an event like the UKCC per se. It just seems very unlikely to me that they’ll actually do it. The VAT question aside, it must take quite a lot of time and energy. Which ECF person is going to do take that on?

[JustinHorton]

There's something that's puzzling me here.

1. Is Mike Basman claiming to have been unaware, when he set up the UK Chess Challenge, that he should have been adding VAT to entry fees?

2. If so, when did he become aware that there was an issue, and did he continue to omit VAT after that?

[Roger Lancaster]

When UKCC was set up, likelihood is that projected turnover was under the then VAT threshold so it would have been understandable if the business (and, as far as HMRC is concerned, this would have been treated as a business) was not initially registered for VAT. What I agree is perplexing is the failure to recognise that, once an undertaking reaches a certain size, VAT becomes a fact of life.

[JustinHorton]

Well that's why I'm asking. Is Basman saying he simply thought it didn't apply, and if so, when did he become aware that the case might be otherwise?

[Roger de Coverly]

2. If so, when did he become aware that there was an issue, and did he continue to omit VAT after that?

This is the 2016 entry form.

http://www.delanceyukschoolschesschalle ... ry2016.pdf

Entry per school is £ 40, but there are a lot of prizes and awards included with that, so the net VAT cost to the UKCC , paperwork permitting, is likely to be minimal, provided the prizes and awards are sourced from VAT registered suppliers. The gross cost would mount up. If there are 80,000 competitors, say 40 per school, that gives a turnover of £ 80,000 within sight of the VAT threshold of £ 85,000.

There's a county stage (Mega) and two national stages (Giga and Tera). Each of the three has a £ 15 entry fee. The county stage is where the turnover could approach and exceed the VAT exemption. So 30 counties times 300 players each times £ 15 gives £ 135,000 per year. VAT at 20% on this would be £ 27,000 a year making it £ 270,000 for ten years, which is not so far off HMRC's demand for £ 300,000 . The national stages are not that huge, say 500 entries at £ 15 bringing in £ 7,500 comfortably below the VAT threshold the same as most other non-ECF events.

[Roger de Coverly]

When UKCC was set up, likelihood is that projected turnover was under the then VAT threshold so it would have been understandable if the business (and, as far as HMRC is concerned, this would have been treated as a business) was not initially registered for VAT.

It's even stranger than that, given that the UKCC was not set up as a ring fenced organisation, rather it was part of Mike's other chess related business activities, such as Audio Chess. We don't know when he first registered for VAT.

Perhaps it's because it has always been run that way, but the UK method of having tournaments run by local organisers gets round the "VAT on chess entry fees" issue in a way that the more centralised Bridge world doesn't emulate.

[Michael Flatt]

The UKCC Megafinal is a well established and important event in the Junior chess calendar and I would want my local Junior Association (of which I am chairman) to continue to run such an event.

It is a remarkable competition that inspires the children who relish the challenge of qualifying for the next stage, whether it be Megafinal, Gigafinal or Terafinal.

As well as providing players the opportunity of a significant competition (around 150 players) within the county it generates significant funds for the benefit of the County Junior Chess Association - all our organisers and helpers are unpaid volunteers. It also provides a good opportunity to get parents involved in the organisation.

The UKCC is a network of many different local organisations (schools, clubs, county associations) which has been built up over twenty years. I can't see that anyone could hope to replicate such a competition without Mike's co-operation and involvement.

[Simon Brown]

So is UKCC in its current guise dead? The website doesn't suggest so.

If Mike has settled his VAT liability via a CVA, there's no reason for him not to continue, perhaps with rather more support in place. If there is a VAT liability of £300k for the last ten years, his gross revenues must have been an average of £150k per year (ignoring any growth in numbers). I don't know enough about the organisation to estimate the running costs, but I guess it was relatively profitable, although there won't be any public figures if he was "accounting" for everything as a sole trader.

With a mechanism to collect and recover VAT, which isn't that difficult, this could be a nice little business for Mike to continue, or for the ECF or anyone else to replicate, as I guess there is no IP in place.

[John Swain]

The UKCC ... is a well established and important event in the Junior chess calendar .....

It is a remarkable competition that inspires the children who relish the challenge of qualifying for the next stage, whether it be Megafinal, Gigafinal or Terafinal. .....

Well said.

I have seen the UKCC grow and flourish over the last twenty years as a parent, teacher and controller at many megafinals. It is a brilliant event which has encouraged mass-participation as well as providing a final where several current IMs and one GM have cut their teeth. It would be a great shame if it collapsed as a national entity.

I am no expert on tax law and those of you with accountancy training will be able to offer a better analysis than I can. When the UKCC first began in 1996 the entry fee as I recollect was low and costs included hiring the Portland Building at Nottingham University and Nigel Short who did a simul. The level above which an organisation paid VAT in those days was £47,000 and the threshold has risen each year to its present £83.000, usually in £1000 or £2000 annual steps, occasionally £3000 or £4000. The UKCC grew massively and at its height had 70,000+ competitors in some years. At some point, it would have become liable to VAT.

Some businesses I know (and the UKCC is a business) choose to keep themselves below the liability for VAT; if they're having a successful year, they take their foot off the gas and do less work towards the end of the tax year. The UKCC was never in this position. One year, it must have been below the threshold, the next, perhaps unexpectedly, it would have been liable to a five figure VAT bill. Anyone thinking of running a similar event needs to be aware of this.

In more recent times, the numbers for the UKCC have been dropping (now 48,000 I believe). The timings of the Megafinals in May were always difficult for those with public exams which is another factor to consider for future UKCC-style events.

[Neil Graham]

My understanding is that accounts were and have been submitted since 1996 and that Mike has discharged his Income Tax liability accordingly.

What has not happened is a VAT return of amounts charged and amounts claimed back for the "reason" that no VAT was levied in the services sold nor was any VAT claimed back for services rendered to UKCC.

For example, despite rather substantial annual printing costs Mike never attempted to claim back the VAT he would have paid for these and other services.

The following judgement may be of assistance - it goes back to 2013. http://www.bailii.org/uk/cases/UKFTT/TC ... 03334.html. I make no comment on what the judge has to say in his ruling; I leave it to forum members to draw their own conclusions.

Going on to a further point raised by Justin and others; despite the above ruling it seems clear from the entry form that VAT wasn't levied or mentioned after the ruling.

Whilst John assures us that accounts have been submitted [without apparent recourse to an accountant] until these have been viewed by people with some expertise and indeed until we know what, if any, personal gain has been made by Mr.Basman from these events it's impossible to gauge whether or not this can be salvaged.

[Simon Brown]

Please let's not speculate as to how UKCC can save VAT going forward. VAT is a hugely complex area best left to the specialists - I'm not one but I have more knowledge than most and even I can see that the level of VAT expertise being demonstrated on this thread is very low.

[Mick Norris]

If Mike has settled his VAT liability via a CVA

It's an IVA as shown here running from 8 August 2016 to 8 August 2017

[Simon Brown]

If Mike has settled his VAT liability via a CVA

It's an IVA as shown here running from 8 August 2016 to 8 August 2017

Thanks Mick, hadn't spotted that.