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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: members taxation

Whether a co-operative is engaged in mutual trading or not, the member is not entitled to a deduction in computing the amount of their trading income for any initial charge or loans made to the co-operative. But the member is entitled to a deduction for normal recurrent service charges made by the co-operative, even though these may include provision for the replacement of capital assets. In either case refunds by the co-operative of annual contributions or distributions of profit should normally be regarded as trading receipts of the member.

Because it is not carrying on a trade within the charge to Corporation Tax, a co-operative engaged in mutual trading is not entitled to capital allowances on its expenditure. For the same reason, a member of a mutually trading co-operative is not entitled to capital allowances on any contribution they make towards the capital expenditure of the co-operative.