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HMRC internal manual

Business Income Manual

Meaning of trade: mutual trading and members clubs: members' clubs: incorporated as limited company: not paying dividends

A social or recreational club may be conducted through the vehicle of a company. Provided that all of the following conditions are met, you should treat such companies as members’ clubs (rather than as proprietary clubs) in agreeing trading profits:

  • the company does not pay dividends to shareholders, and
  • any share capital is all of one class, and every member (other than a person with restricted membership - BIM24220) is a shareholder, and
  • the intention is that the members and shareholders shall be an identical body, and
  • substantial identity actually exists between members and shareholders.

You should ignore the death, resignation or removal of former members in considering whether substantial identity exists. You should consider any inequality of shareholdings in doubtful cases but, in general, such may be ignored as long as dividends are not paid.