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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Meaning of trade: mutual trading and members clubs: members’ clubs: layout of guidance: contents

You need to consider two interrelated questions:

  • first, is there a trade (see BIM24045), and
  • second, if there is a trade, is that trade a mutual trade (see BIM24100).

The first of these questions, whether or not a trade exists, is all too often overlooked. This is of particular relevance for social and recreational clubs. This subject represents one strand of the ‘mutuality’ case law (mutual insurance being the other major strand - see BIM24100 onwards).

The use of the term ‘mutual trading’ in the context of a members’ club is misleading, since when members of such clubs come together to provide facilities for themselves, their activities do not normally constitute a trade, because they lack the necessary commerciality.

If there is no trade, there can be no mutual trade and therefore you do not need to consider the issue any further.

So the practical starting point in an apparent case of mutual trading, is to consider whether there is any trade at all.

Allowable expenditure in ‘mixed’ cases, including part mutual and part non-mutual trading, is considered at BIM24450 onwards.

The following guidance covers: