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HMRC internal manual

Business Income Manual

From
HM Revenue & Customs
Updated
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Meaning of trade: mutual trading and members clubs: income derived solely from members’ contributions and subscriptions

Not mutual trading

Where entities in the categories listed below derive their income solely from members’ subscriptions and contributions, they do not normally carry on a trade. An entity that does not carry on a trade cannot be a mutual trader.

Trade/professional associations

  • Ordinary trade or professional associations, being non-trading bodies formed to protect the common interests of members, and deriving their funds from annual subscriptions etc paid by members. For detailed guidance on trade protection associations see BIM24800.

Members’ clubs

  • Members’ clubs established for social or recreational purposes (in this connection, see BIM24200 onwards, and BIM24220 for trading by clubs with non-members).

Companies limited by guarantee and with non-trading objects

  • Other bodies incorporated (for example, by Royal Charter or as companies limited by guarantee, usually with authority to omit ’limited’ from the registered name) for non- trading objects, and deriving their funds wholly or mainly from members’ subscriptions or from donations towards such objects. For guidance on Chambers of Commerce see BIM24750.

Unincorporated associations

  • Unincorporated societies, associations etc (for example, societies registered under the Friendly Societies’ Acts and trade unions). Where, exceptionally, the association, etc. provides goods or services to members on a commercial basis for payment then you should (where the sums merit enquiry) look to see if this amounts to a trade. And where the association, etc. does conduct such a trade you will need to establish if the activities amount to a mutual trade, the profits from which are not taxable as trading income.

For discussion of whether income is trading income see BIM24045, and for further guidance on mutual trading see BIM24015 onwards.