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HMRC internal manual

Business Income Manual

Meaning of trade: mutual trading and members clubs: mutual associations: specific activities: NHS doctors’ co-operatives: does the trade meet the criteria?

Is the trade a mutual trade?

The classic definition of mutual trading remains that given by Rowlatt in Municipal Mutual Insurance Ltd v Hills [1932] 16TC430, see BIM24025, where he said at page 438:

‘… a certain class of people are associating together to put up money to achieve an object for each other, and divide what is not wanted among themselves in that character, namely, in the character of the persons who put it up.’

The essential features for a trade to be mutual trading are set out at BIM24020. There is no relaxation of these criteria in the case of NHS doctors’ co-operatives which are providing out-of-hours care on their own behalf. You should apply the tests in exactly the same way as you would to an entity carrying on any other activity. In particular you should ensure that any surplus must go back to the contributors and to no one else - see however BIM24675.