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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 & members clubs: allowable expenditure: trades that are partly non-mutual

How to apportion between the mutual and non-mutual aspects of the trade

As explained at BIM24210, the typical members’ sporting club does not carry on a trade. The activities undertaken by the club lack the required degree of commerciality that case law shows is an essential characteristic of a trade.

The most commonly encountered situation is that a bone fide members’ club does not trade with its members but that the club may carry on a trade in making sporting or other facilities available to non-members on a commercial basis. The question then arises as to how to apportion the expenses incurred by the club between its non-taxable dealings with members and its taxable dealings with non-members.

A typical club will incur expenses that fall into three broad categories:

  • wholly for members
  • wholly for non-members, and
  • both for members and for non-members.

In calculating the amount of the club’s profits taxable as trade profits the expenditure incurred wholly for members (for example the membership secretary’s salary, costs of a members only bar) will not be allowable at all. The costs that are incurred wholly for non-members (for example costs of advertising to attract non-member custom) will be allowable provided of course that they otherwise meet the trading deduction rules. Problems can arise with the ‘mixed’ category of expenditure and this is discussed in the guidance that follows.