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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: tax treatment

Where the co-operative is engaged in mutual trading, then:

  1. its operating surplus is not liable to Corporation Tax,
  2. its operating deficit is not a trade loss and does not qualify for any of the reliefs for such losses,
  3. it may not claim capital allowances in respect of capital expenditure incurred for the purposes of its (mutual) trade, and
  4. its liability to Corporation Tax will be confined to other profits (for example, bank interest, rents, building society interest, capital gains, and of course the profits of any non-mutual trade including profits derived from trading with any non-members).

The co-operative may be entitled to relief under the loan relationship rules (see CFM30000) against the profits in (d) above in respect of interest paid on money borrowed to acquire or improve an interest in land or buildings.