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HMRC internal manual

Business Income Manual

Meaning of trade: mutual trading and members clubs: mutual associations: specific activities: agricultural co-operatives: introduction and layout of guidance

Over the years farmers, market gardeners and fishermen have set up co-operatives. These co-operatives provide a variety of facilities to their members including:

  1. acting as marketing agents for members’ produce
  2. providing facilities for members (for example, grain storage/drying) and
  3. bulk-buying operations for members.

Governments have in the past encouraged this process through the Central Council for Agricultural and Horticultural Co-operation (CCAHC), later called Food from Britain.

The following guidance covers:

BIM24710 Background
BIM24715 Model constitution
BIM24720 Points to watch
BIM24725 Financing
BIM24730 Taxation of agricultural co-operatives
BIM24735 Position if not conducting a mutual trade
BIM24740 Taxation of the co-operative’s members
BIM24745 Futures dealing

You should establish whether the agricultural co-operative’s constitution says that:

  • only members can use the facilities and services the co-operative provides,
  • if the co-operative is a marketing agency,
  • the co-operative sells on behalf of the growers and never owns the produce,
  • members agree to market a certain amount of produce through the co-operative or provide a certain amount for processing,
  • any surplus is shared out among members according to the amount of business they have done with the co-operative recently.

If a co-operative buys produce from members who grow it, then sells it to a third party, the trade is not mutual. However, if a co-operative sells the produce as an agent for the members and makes a surplus from the service, the trade is mutual as long as it passes the other tests for mutuality - see BIM24100.