Welsh, Scottish and Irish funding

[Roger de Coverly]

This is about ECF funding really, but from what little I know about the other 3 federations, I believe that none of them have any paid staff. That's not to say that they don't pay anyone, rather that activities are done and perhaps paid on a part time basis rather than having a full time office.

I'm not so concerned about how they raise the money, more with how much they spend and how it relates to size as measured by player count and game count.

Perhaps I'm asking how large they could get without requiring a paid office, or conversely how much the ECF would have to shrink to be run in the style of the other three.

[Andy Howie]

It is not strictly true that Chess Scotland does not have paid staff. We have three who get an annual honorarium.

Our total income last year was about half of the Grant you had from the government. We currently have 550 ish members. From memory about 1/3 is spent on Juniors, 1/3 on Adult Internationals and the rest on everything else. All the information is available on the Chess Scotland website. The current figures are under AGM minutes on the front page.

We survive without an office as we have a group of dedicated volunteers. The costs for an office would be far greater than the income we have.

Any other questions, please fire away

[Roger de Coverly]

We currently have 550 ish members.

That's the membership count I believe. What's the total number of active players ? I know you have a high percentage of players as members.

[Andy Howie]

Don't have the figures offhand as I am in Blackpool for the congress. Will look them up when I get back

[Joe Skielnik]

Would I be right in saying that Welsh, Scottish and Irish federations do not pay VAT because their turnover is below the threshold ? If so could the ECF form regional companies to collect subscriptions and thereby avoid VAT as each company would be below the VAT threshold ?

[Roger de Coverly]

Would I be right in saying that Welsh, Scottish and Irish federations do not pay VAT because their turnover is below the threshold ? If so could the ECF form regional companies to collect subscriptions and thereby avoid VAT as each company would be below the VAT threshold ?

Welsh and Scottish presumably yes. Irish is Republic of Ireland so Irish vat rules would apply.

An obvious problem for the ECF would be that it spends more than the VAT threshold on the office in Battle, so even if the chess unions (SCCU, WECU, NCCU, MCCU, EACU) collected money on behalf of the ECF, there is still a VAT impact when they pay it over to the ECF.

[Mike Truran]

It may not change the answer, but the VAT threshold is based on an organisation's turnover, not on what it spends.

[Joe Skielnik]

Not collected by the Unions but by 2 or 3 new companies say ECF(N) and ECF(S) which could still be based at Battle but which would require separate officers and accounts. ECF could still be retained to deal with central policy issues.

[Mike Truran]

You would need to be careful about being seen not to be setting up artificial arrangements the main purpose of which was to reduce/avoid VAT (I recall the same point being made a while back on another thread somewhere).

Given that the existing structures have been in place and operating (more or less satisfactorily) for some years, it would probably be quite hard to demonstrate that any restructuring had a genuine commercial purpose and was being carried out for anything other than tax reasons.

[Andrew Farthing]

It's more relevant to think in terms of the potential split into a charity (covering amateur chess) and a non-charitable organisation (covering international/professional chess, including the British Championships). These would be separate organisations, established because they have distinctive goals - exclusively charitable (promoting amateur sport) in one case, non-charitable in the other.

It is distinctly possible that such an arrangement would have twin financial advantages: allowing the charity to benefit from Gift Aid on donations and membership subscriptions from UK taxpayers and potentially leaving the professional chess body small enough to fall below the VAT threshold.

None of this can be taken as a done deal, of course, but I am certainly looking closely at it, with a view to having proposals for the October AGM.

I don't ignore the issue of allocating resources in support of the two potential organisations. This will need some thought, but I feel sure that something acceptable can be achieved.

[David Shepherd]

It's more relevant to think in terms of the potential split into a charity (covering amateur chess) and a non-charitable organisation (covering international/professional chess, including the British Championships). These would be separate organisations, established because they have distinctive goals - exclusively charitable (promoting amateur sport) in one case, non-charitable in the other.

It is distinctly possible that such an arrangement would have twin financial advantages: allowing the charity to benefit from Gift Aid on donations and membership subscriptions from UK taxpayers and potentially leaving the professional chess body small enough to fall below the VAT threshold.

None of this can be taken as a done deal, of course, but I am certainly looking closely at it, with a view to having proposals for the October AGM.

I don't ignore the issue of allocating resources in support of the two potential organisations. This will need some thought, but I feel sure that something acceptable can be achieved.

This sounds very sensible to me. I think it would work well and certainly the sensible commercial structure would have the added benefit of tax advantages. I am not so sure about the international chess. I think maybe just amateur and professional split. So for example junior international chess is likely to be amateur.

[Andrew Farthing]

This sounds very sensible to me. I think it would work well and certainly the sensible commercial structure would have the added benefit of tax advantages. I am not so sure about the international chess. I think maybe just amateur and professional split. So for example junior international chess is likely to be amateur.

I agree. The intention is to retain all junior activity within the charity.

By "International", I mean primarily the adult Olympiad and European Team Championship expenditure. The players in these events are undeniably professionals, whom the ECF pays for their efforts. With regard to the British, there is some flexibility. Strictly speaking, it can be argued with reasonable confidence that only the top section, i.e. the main Championship itself, comes under the professional chess banner. This might leave room, for example, for the charity to provide funding (via grants) to support the various amateur sections, if this was desirable and helped make the financial numbers work.

Ideally, I'd like to arrive at a point where the fund-raising from chess players (e.g. membership subscriptions) is directed only at the charity, while the non-charity is self-supporting (i.e. funded by the British Championships and whatever sponsorship it can attract). This would just make the mechanics so much simpler in practice.

[Roger de Coverly]

while the non-charity is self-supporting (i.e. funded by the British Championships and whatever sponsorship it can attract). This would just make the mechanics so much simpler in practice.

In recent years, the British Championships have struggled to support themselves, let alone act as a fund raiser for the International teams. I don't think you should expect participants in the British to exclusively pay for the International teams, when you make no similar charges against players in other internationally rated events.

[Stewart Reuben]

My local bridge Club, Richmond, is above the VAT threshold in turnover. But VAT is levied at just 7%. I am told this is because it is a membership club which is not-for-profit. Much like the ECF is, or is seeking to be.
I have raised this issue before, but have not succeeded in getting other ECF people to investigate, partly due to a lack of time. It is not n my sphere of competence. Can anybody help?
Stewart Reuben

[Roger de Coverly]

My local bridge Club, Richmond, is above the VAT threshold in turnover. But VAT is levied at just 7%. I am told this is because it is a membership club which is not-for-profit. Much like the ECF is, or is seeking to be. I have raised this issue before, but have not succeeded in getting other ECF people to investigate, partly due to a lack of time. It is not n my sphere of competence. Can anybody help?
Stewart Reuben

Might it be this scheme?
http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm

A "membership organisation" can pay 7%.

Presumably at the moment the ECF has a tax liability at 20% on income, but can counter this by reclaiming VAT on expenditure, so the effective VAT rate is somewhat lower.

Unlike the Richmond Bridge club, the ECF is on the borderline of being too big.

Your estimated VAT taxable turnover - excluding VAT - in the next year will be £150,000 or less. Your VAT taxable turnover is the total of everything that you sell during the year that is liable for VAT. It includes standard, reduced rate or zero rate sales or other supplies. It excludes the actual VAT that you charge, VAT exempt sales and sales of any capital assets.

Once you join the scheme you can stay in it until your total business income is more than £230,000.