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HMRC internal manual

Business Income Manual

Grant aided bodies: arms length management organisations (ALMOs)


The typical ALMO is set up by a local council as a company limited by guarantee without share capital and the council is its sole member. ALMOs manage, repair, improve and maintain the council’s housing stock. The ownership of the housing stock remains with the council which is also the legal landlord, and tenants remain secure tenants of the council. ALMOs also undertake a range of other services for their council that help deliver broader local authority functions, for example advice to council tenants, dealing with arrears, debt counselling, tenancy enforcement, allocations and lettings, administering the homeless and private sector housing functions such as grant administration, collecting rents from the tenants as agent for the council, grounds maintenance and community safety initiatives.


The council funds the ALMO for carrying out these services on its behalf by way of a ‘management/contract fee’. The funding comes from the council’s housing revenue account (HRA) and in the event of the ALMO being wound up or otherwise dissolved the memorandum and articles of association will normally state that any surplus remaining must be paid or transferred back to the council’s HRA. Any monies held by an ALMO must be applied solely towards the promotion of its objects as set out in its memorandum of association. Therefore the funding received from the council must be applied by the ALMO in meeting its council member’s objectives.

Taxation status

An ALMO is a separate legal entity from the controlling local authority/council and therefore it does not benefit from the exemption from Corporation Tax granted to local authorities. As an incorporated entity it comes within the tax definition of ‘company’ and is therefore within the charge to Corporation Tax.

We have reviewed in detail a typical ALMO, and have had discussions with the National Federation of ALMOs. The arrangements that we have seen, between an ALMO and its council member, lack the necessary element of commerciality to amount to trading.

When dealing with an ALMO, provided its memorandum and articles of association and arrangements are in line with that described in the preceding paragraphs, you may accept that the transactions between the ALMO and its council member do not amount to trading.

However, where the ALMO offers its services to third parties for reward, those transactions will be trading transactions.

Because transactions between an ALMO and its council are not trading at all, there can be no question of them being mutual trading transactions.

Any case of doubt or difficulty not covered by this guidance, and any cases where the trading status of ALMOs is in question, should be referred to Business Profits prior to the commencement of enquiries.