The government hopes to encourage private sector investment in grassroots sport by exploring the possibility of reducing or scrapping corporation tax, thus weaning clubs and organisations off public sector support.

A consultation process has been launched by the Treasury – as reported by Sports Management earlier this week – in which it will ask stakeholders and the public if grassroots sports clubs should be exempt from paying corporation tax.

One of the themes of the consultation is to investigate whether private sector contributions to grassroots sport can be increased by implementing reforms cutting tax on expenditure for grassroots facilities, playing kit and equipment, volunteer training and support, coaches, the recruitment and training of referees and competition costs.

“In times of pressure on the government finances, it is crucial that government, the private sector and the sports industry work together to consider new ways of ensuring the long-term financial sustainability of the sector,” said David Gauke, financial secretary to the Treasury.

The consultation paper added: “By reaffirming its support to private initiatives, the government wishes to encourage sports clubs to fully exploit the potential of alternative income streams. The outcome of this consultation should contribute to the creation of new sources of funding for sports activities and foster a more joined-up approach to delivery and funding.”

The consultation will also look at the definition of grassroots sport to make sure those most deserving get the tax relief needed. It will also decide which sports and physical activities will be eligible.

“The proposed reform is aimed specifically at increasing funding available to sports played at grassroots level,” said the paper. “Grassroots is a term that is widely recognised, and most people have an intuitive sense of what it means – but defining it in more specific terms is more difficult.

“A key part of this consultation is to reach a shared understanding of what constitutes ‘grassroots sport’ for the purposes of the proposed new tax deduction.”

The consultation process will happen in five stages, in line with the Tax Consultation Framework. Interested stakeholders are being asked to respond to the consultation by 15 June 2016.