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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Meaning of trade: mutual trading and members clubs: mutual associations: specific activities: trade protection associations: HMRC arrangement

Ordinary trade protection associations, formed to protect the common interests of their members and funded by their annual subscriptions, are normally non-trading concerns and so cannot carry on a mutual trade - see BIM24010.

A member of a trade association is entitled to a deduction for that part of their subscription which is applied by the association towards expenditure which would have been allowable had it been incurred by the member themselves (Lochgelly Iron & Coal Company Ltd v Crawford [1913] 6TC267). Unless the Tribunal is otherwise satisfied, effect cannot be given to a member’s right to a deduction without the production of the association’s accounts (Grahamston Iron Company v Crawford [1915] 7TC25). Following these cases the HMRC established its long-standing trade protection association arrangement.

A trade protection association, whose members’ subscriptions are not otherwise chargeable to Corporation Tax, may make an application to adopt the HMRC arrangement. The arrangement amounts to a contractual agreement under which:

  • members’ entrance fees, subscriptions, levies and other payments (other than loans or payments of a capital nature), are allowed in full as deductions,
  • payments which the association makes to members (other than loans or payments of a capital nature), are to be treated as their trade receipts,


  • the association agrees to be assessed to Corporation Tax on any surplus of receipts over expenditure, computed under trade profits rules.

In effect the arrangements honour the Lochgelly principle but by a different route.

These arrangements can only be made with associations that have members who are chargeable for trade profits and who would normally be dealt with under BIM47420. However, see BIM47430 about subscriptions to small local associations.

Where an association appears to meet the necessary criteria and has not applied for the arrangements you should send them details of how they work. You should deal with any application according to the instructions given in the first sub-paragraph of BIM24810. When you first contact the association make it clear that any application to adopt the arrangements will be referred to CTISA (Technical) for approval.