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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: background

Where an entity carries on a trade, the requirements for that trade to be a mutual trade are set out in BIM24020.

In practice you need to establish that the constitution and legal framework of the body is such that mutual trading is possible, and the activities of the body comply with that constitution.

Many agricultural co-operatives conduct their activities on the basis of mutual trading, with the result that surpluses arising from transactions with, and services provided to, their own members are not liable to Corporation Tax. This means that such liability arises only in respect of other profits (for example, profits on transactions with non-members, bank interest, rents, capital gains and so on).