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HMRC internal manual

Business Income Manual

Meaning of trade: mutual trading and members clubs: distributions: the basic approach

Where a trader makes a payment to a mutual concern, whether incorporated or not, and that payment has been allowed as a deduction in arriving at the trader’s taxable trade profits (for example, insurance premiums see BIM45590) any distribution by the mutual concern (prior to its winding-up) should be regarded as a receipt of the recipient’s trade etc to the extent that the distribution represents a return of payments made.

Similar treatment should be applied to sums received by a trader on, or as a consequence of, the winding-up of an unincorporated mutual concern.

For guidance on distributions by mutual traders that are bodies corporate see BIM24565.

For further guidance on distributions that are taxable on first principles see BIM24605.